- -------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 28, 1997
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from ____________________ to_________________
Commission file number: 1-2207
TRIARC COMPANIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 38-0471180
- ------------------------------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
280 Park Avenue, New York, New York 10017
------------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(212) 451-3000
---------------------
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes (X) No ( )
There were 24,073,448 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, 1997.
- -------------------------------------------------------------------------------
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
<TABLE>
<CAPTION>
TRIARC COMPANIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
DECEMBER 31, SEPTEMBER 28,
1996 (A) 1997
---------- ------------
(IN THOUSANDS)
ASSETS (UNAUDITED)
<S> <C> <C>
Current assets:
Cash and cash equivalents.............................................................$ 154,405 $ 69,149
Short-term investments................................................................ 51,711 57,246
Receivables, net...................................................................... 80,613 117,063
Inventories........................................................................... 55,340 93,570
Assets held for sale.................................................................. 71,116 --
Deferred income tax benefit .......................................................... 16,409 43,571
Prepaid expenses and other current assets ............................................ 16,068 10,449
------------ ------------
Total current assets................................................................ 445,662 391,048
Properties, net........................................................................... 107,272 119,992
Unamortized costs in excess of net assets of acquired companies........................... 203,914 288,767
Trademarks................................................................................ 57,257 260,525
Deferred costs, deposits and other assets................................................. 40,299 76,027
------------ ------------
$ 854,404 $ 1,136,359
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Current portion of long-term debt.....................................................$ 93,567 $ 16,696
Accounts payable...................................................................... 52,437 71,264
Accrued expenses...................................................................... 104,483 176,469
----------- ------------
Total current liabilities........................................................... 250,487 264,429
Long-term debt............................................................................ 500,529 737,273
Deferred income taxes..................................................................... 34,455 78,063
Other liabilities......................................................................... 28,444 49,441
Minority interests........................................................................ 33,724 22,293
Stockholders' equity (deficit):
Common stock.......................................................................... 3,398 3,398
Additional paid-in capital............................................................ 161,170 165,146
Accumulated deficit................................................................... (111,824) (136,184)
Treasury stock........................................................................ (46,273) (44,570)
Other ............................................................................... 294 (2,930)
------------ ------------
Total stockholders' equity (deficit)................................................ 6,765 (15,140)
------------ ------------
$ 854,404 $ 1,136,359
============ ============
(A) Derived from the audited consolidated financial statements as of December 31, 1996
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
TRIARC COMPANIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED NINE MONTHS ENDED
----------------------------- -----------------------------
SEPTEMBER 30, SEPTEMBER 28, SEPTEMBER 30, SEPTEMBER 28,
1996 1997 (NOTE 1) 1996 1997 (NOTE 1)
---- ------------- ---- -------------
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<S> <C> <C> <C> <C>
Revenues:
Net sales................................................$ 191,533 $ 257,060 $ 739,870 $ 658,942
Royalties, franchise fees and other revenues............. 14,914 17,941 41,947 47,582
----------- ----------- ----------- -----------
206,447 275,001 781,817 706,524
----------- ----------- ----------- -----------
Costs and expenses:
Cost of sales............................................ 128,647 147,407 524,099 402,813
Advertising, selling and distribution.................... 35,226 60,266 107,326 141,058
General and administrative............................... 31,189 41,851 95,877 108,723
Facilities relocation and corporate restructuring ....... -- -- -- 7,350
Acquisition related ..................................... -- -- -- 32,440
----------- ----------- ----------- -----------
195,062 249,524 727,302 692,384
----------- ----------- ----------- -----------
Operating profit....................................... 11,385 25,477 54,515 14,140
Interest expense............................................ (16,513) (20,844) (57,576) (54,807)
Gain on sale of businesses, net............................. 77,123 2,603 76,623 261
Investment income, net...................................... 2,446 6,428 4,477 10,927
Other income (expense), net................................. 213 (1,152) 479 3,603
----------- ----------- ----------- -----------
Income (loss) before income taxes, minority
interests and extraordinary items................... 74,654 12,512 78,518 (25,876)
Benefit from (provision for) income taxes................... (29,091) (3,520) (34,753) 5,693
Minority interests in (income) loss of consolidated
subsidiary............................................... 1,769 1,948 1,769 (1,223)
----------- ----------- ----------- -----------
Income (loss) before extraordinary items............... 47,332 10,940 45,534 (21,406)
Extraordinary items......................................... 3,122 -- (5,416) (2,954)
----------- ----------- ----------- -----------
Net income (loss)......................................$ 50,454 $ 10,940 $ 40,118 $ (24,360)
=========== =========== ============ ===========
Income (loss) per share:
Income (loss) before extraordinary items...............$ 1.50 $ .35 $ 1.52 $ (.71)
Extraordinary items.................................... .10 -- (.18) (.10)
----------- ----------- ----------- -----------
Net income (loss)......................................$ 1.60 $ .35 $ 1.34 $ (.81)
=========== =========== =========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
TRIARC COMPANIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED
-------------------------------
SEPTEMBER 30, SEPTEMBER 28,
1996 1997 (NOTE 1)
---- -------------
(IN THOUSANDS)
(UNAUDITED)
<S> <C> <C>
Cash flows from operating activities:
Net income (loss)........................................................................$ 40,118 $ (24,360)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Gain on sale of businesses, net..................................................... (76,623) (261)
Depreciation and amortization of properties......................................... 24,235 13,967
Amortization of costs in excess of net assets of acquired companies and
trademarks and other amortization................................................. 11,716 15,161
Amortization of deferred financing costs and in 1996, original issue discount ..... 4,592 3,906
Write-off of deferred financing costs and in 1996, original issue discount.......... 12,245 4,839
Discount from principal on early extinguishment of debt............................. (9,237) --
Provision for acquisition related costs, net of payments............................ -- 29,245
Provision for facilities relocation and corporate restructuring, net of payments.... (2,580) 51
Deferred income tax provision (benefit)............................................. 30,531 (8,507)
Realized gain on short-term investments ............................................ (116) (4,653)
Minority interests in income (loss) of consolidated subsidiary...................... (1,769) 1,223
Provision for doubtful accounts..................................................... 2,757 2,940
Other, net.......................................................................... (6,353) 2,045
Changes in operating assets and liabilities:
Decrease (increase) in:
Receivables.................................................................... (8,232) 4,092
Inventories.................................................................... (18,794) (8,518)
Prepaid expenses and other current assets...................................... (796) 7,736
Increase in accounts payable and accrued expenses ............................... 18,167 4,325
--------- ---------
Net cash provided by operating activities.................................. 19,861 43,231
--------- ---------
Cash flows from investing activities:
Acquisition of Snapple Beverage Corp..................................................... -- (321,063)
Other business acquisitions.............................................................. (4,726) (7,568)
Capital expenditures..................................................................... (21,532) (10,956)
Cost of short-term investments purchased................................................. (41,285) (42,012)
Proceeds from short-term investments sold................................................ 10,014 40,933
Proceeds from sales of properties........................................................ 1,601 3,299
Proceeds from sale of the textile business (net of post-closing adjustments and
expenses paid of $12,709,000).......................................................... 244,920 --
Other .................................................................................. (164) 612
--------- ---------
Net cash provided by (used in) investing activities........................ 188,828 (336,755)
--------- ---------
Cash flows from financing activities:
Proceeds from long-term debt............................................................. 166,576 335,112
Repayments of long-term debt (including $191,438,000 of long-term debt repaid in
1996 in connection with the sale of the textile business).............................. (416,371) (107,283)
Restricted cash used to repay long-term debt............................................. 30,000 --
Deferred financing costs................................................................. (7,470) (11,304)
Distributions paid on propane partnership common units................................... -- (10,554)
Proceeds from sale of partnership units in the propane business (net of expenses
of $14,400,000)........................................................................ 117,933 --
Other .................................................................................. (538) 1,686
--------- ---------
Net cash provided by (used in) financing activities........................ (109,870) 207,657
--------- ---------
Net cash provided by (used in) continuing operations......................................... 98,819 (85,867)
Net cash provided by discontinued operations................................................. 1,702 611
---------- ---------
Net increase (decrease) in cash and cash equivalents......................................... 100,521 (85,256)
Cash and cash equivalents at beginning of period............................................. 64,205 154,405
--------- ---------
Cash and cash equivalents at end of period...................................................$ 164,726 $ 69,149
========= =========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
(1) BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements of
Triarc Companies, Inc. ("Triarc" and, together with its subsidiaries, the
"Company") have been prepared in accordance with Rule 10-01 of Regulation S-X
promulgated by the Securities and Exchange Commission (the "SEC") and,
therefore, do not include all information and footnotes necessary for a fair
presentation of financial position, results of operations and cash flows in
conformity with generally accepted accounting principles. In the opinion of the
Company, however, the accompanying condensed consolidated financial statements
contain all adjustments, consisting only of normal recurring adjustments,
necessary to present fairly the Company's financial position as of December 31,
1996 and September 28, 1997, its results of operations for the three-month and
nine-month periods ended September 30, 1996 and September 28, 1997 and its cash
flows for the nine-month periods ended September 30, 1996 and September 28, 1997
(see below). This information should be read in conjunction with the
consolidated financial statements and notes thereto included in the Company's
Annual Report on Form 10-K, as amended, for the year ended December 31, 1996
(the "Form 10-K").
Effective January 1, 1997 the Company changed its fiscal year from a
calendar year to a year consisting of 52 or 53 weeks ending on the Sunday
closest to December 31. In accordance therewith, in 1997 the Company's third
quarter commenced on June 30 and ended on September 28 and the nine months ended
September 28 commenced on January 1 and are referred to herein as the
three-month and nine-month periods ended September 28, 1997, respectively. The
fourth quarter of 1997 will consist of 13 weeks ending December 28.
Certain amounts included in the prior comparable periods' condensed
consolidated financial statements have been reclassified to conform with the
current periods' presentation.
(2) SIGNIFICANT 1997 TRANSACTIONS
ACQUISITION OF SNAPPLE
On May 22, 1997 Triarc acquired (the "Acquisition") Snapple Beverage Corp.
("Snapple"), a producer and seller of premium beverages, from The Quaker Oats
Company ("Quaker") for $321,063,000 including cash of $308,000,000 (including
$8,000,000 of post-closing adjustments and subject to additional post-closing
adjustments), $10,300,000 of estimated fees and expenses and $2,763,000 of
deferred purchase price. The purchase price for the Acquisition was funded from
(i) $75,000,000 of cash and cash equivalents on hand and contributed by Triarc
to Triarc Beverage Holdings Corp. ("TBHC"), a wholly-owned subsidiary of the
Company and the parent of Snapple and Mistic Brands, Inc. ("Mistic"), a
wholly-owned subsidiary of the Company, and (ii) $250,000,000 of borrowings by
Snapple on May 22, 1997 under a $380,000,000 credit agreement, as amended (the
"Credit Agreement" - see Note 5) entered into by Snapple, Mistic and TBHC
(collectively, the "Borrowers").
The Acquisition is being accounted for in accordance with the purchase
method of accounting. The allocation of the $321,063,000 purchase price of
Snapple to the unaudited Snapple balance sheet as of May 22, 1997, on a
preliminary basis subject to finalization, is as follows (in thousands):
<TABLE>
<CAPTION>
TRIARC COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 28, 1997
(UNAUDITED)
PURCHASE ADJUSTED FOR
ACCOUNTING PURCHASE
SNAPPLE ADJUSTMENTS ACCOUNTING
------- ----------- -----------
ASSETS
<S> <C> <C> <C>
Current assets:
Receivables, net...........................................................$ 40,279 $ -- $ 40,279
Inventories................................................................ 33,250 1,875 (a) 35,125
Deferred income tax benefit................................................ 11,746 7,524 (g) 19,270
Prepaid expenses and other current assets.................................. 14,019 -- 14,019
--------- ---------- -----------
Total current assets................................................... 99,294 9,399 108,693
Properties, net............................................................ 26,969 (7,966) (b) 19,003
Unamortized costs in excess of net assets of acquired companies............ -- 88,942 (i) 88,942
Trademarks ................................................................ 272,703 (62,703) (c) 210,000
Deferred costs, deposits and other assets.................................. 15,541 12,001 (d) 27,542
--------- ---------- -----------
$ 414,507 $ 39,673 $ 454,180
========= ========== ===========
LIABILITIES AND EQUITY
Current liabilities:
Current portion of long-term debt..........................................$ 53 $ -- $ 53
Accounts payable .......................................................... 11,880 -- 11,880
Accrued expenses........................................................... 35,209 20,157 (e) 55,366
--------- ---------- -----------
Total current liabilities.............................................. 47,142 20,157 67,299
Deferred income taxes...................................................... 73,458 (29,124) (g) 44,334
Other liabilities.......................................................... 1,160 20,324 (f) 21,484
Net assets of Snapple...................................................... 292,747 28,316 (h) 321,063
--------- ---------- -----------
$ 414,507 $ 39,673 $ 454,180
========= ========== ===========
DEBIT
(CREDIT)
(a) Adjust "Inventories" to fair value ....................................................................$ 1,875
(b) Adjust "Properties, net" to (i) eliminate refrigerated display cases to conform
accounting to the Company's policy of expensing such display cases when
purchased and placed in service ($7,851) and (ii) write off other
acquired properties which the Company plans to abandon ($115) ...................................... (7,966)
(c) Adjust "Trademarks" to reduce the fair value of the trademarks and tradenames,
formulas and distribution network of Snapple in accordance with an independent
appraisal ......................................................................................... (62,703)
(d) Adjust "Deferred costs, deposits and other assets" to (i) write up Snapple's investments
in affiliates to fair value principally in accordance with an independent appraisal ($13,195)
and (ii) eliminate Snapple's investment in its own distribution routes ($1,194) .................... 12,001
(e) Adjust "Accrued expenses" to record (i) the fair value of the current portion of the
Company's long-term production contracts with copackers which the Company does
not anticipate utilizing based on the future volumes projected by the Company ($7,872),
(ii) the Company's obligations relating to employee severance, stay bonuses and
outplacement services for terminated Snapple employees notified at or shortly after the
Acquisition ($3,799), (iii) obligations related to contracts terminated by the Company for
advertising, marketing and product development programs committed to prior to the
Acquisition ($2,736), (iv) an obligation related to the termination of certain distribution
agreements ($700), (v) obligations related to packaging materials for product discontinued
by the Company ($200) and (vi) an estimate of other liabilities to be identified by the
Company in the finalization of the purchase accounting allocation in connection with the
Acquisition ($4,850)................................................................................ (20,157)
(f) Adjust "Other liabilities" to record the fair value of the long-term portion of the Company's
long-term production contracts with copackers which the Company does not anticipate
utilizing based on future volumes projected by the Company ......................................... (20,324)
(g) Adjust deferred income taxes relating to Snapple and establish the net deferred income tax
benefits relating to the purchase accounting adjustments herein consisting of an increase
to the current asset ($7,524) and a decrease to the noncurrent liability ($29,124).................. 36,648
(h) Eliminate the "Net assets of Snapple" ($292,747) and record the push-down of the Acquisition
purchase price ($321,063) to the equity of Snapple ................................................. (28,316)
(i) Record the excess of the Company's investment in Snapple over the adjusted net assets
of Snapple as "Unamortized costs in excess of net assets of acquired companies"
("Goodwill")......................................................................................... 88,942
------------
$ --
============
</TABLE>
The results of operations of Snapple from the May 22, 1997 date of the
Acquisition through September 28, 1997 have been included in the accompanying
condensed consolidated statements of operations. See below under "C&C Sale" for
the unaudited pro forma condensed consolidated statements of operations of the
Company for the year ended December 31, 1996 and the nine-month period ended
September 28, 1997 giving effect to the Acquisition and related transactions as
well as the sale of restaurants and the C&C Sale (see below).
SALE OF RESTAURANTS
On May 5, 1997 certain of the principal subsidiaries comprising the
Company's restaurant segment sold to an affiliate of RTM, Inc. ("RTM"), the
largest franchisee in the Arby's system, all of the 355 company-owned Arby's
restaurants (the "RTM Sale"). The sales price consisted of cash and a promissory
note (discounted value) aggregating $1,379,000 and the assumption by RTM of an
aggregate $54,620,000 in mortgage and equipment notes payable and $14,955,000 in
capitalized lease obligations. RTM now operates the 355 restaurants as a
franchisee and pays royalties to the Company at a rate of 4% of those
restaurants' net sales effective May 5, 1997. In the fourth quarter of 1996 the
Company recorded a charge to reduce the carrying value of the long-lived assets
associated with the restaurants sold (reported as "Assets held for sale" in the
accompanying condensed consolidated balance sheet at December 31, 1996) to their
estimated fair values and, in the second quarter of 1997, recorded a $2,342,000
loss on the sale (included in "Gain on sale of businesses, net"), which includes
a $1,457,000 provision for the fair value of future lease commitments and debt
repayments assumed by RTM for which the Company remains contingently liable if
the payments are not made by RTM. The results of operations of the sold
restaurants have been included in the accompanying condensed consolidated
statements of operations through the May 5, 1997 date of sale. Following the
sale of all of its company-owned Arby's restaurants, the Company continues as
the franchisor of the Arby's system.
C&C SALE
On July 18, 1997, the Company completed the sale (the "C&C Sale" and,
collectively with the RTM Sale, the "Sales") of its rights to the C&C beverage
line of mixers, colas and flavors, including the C&C trademark and equipment
related to the operation of the C&C beverage line, to Kelco Sales & Marketing
Inc. ("Kelco") for the proceeds of $750,000 in cash and an $8,650,000 note (the
"Kelco Note") with a discounted value of $6,003,000 consisting of $3,623,000
relating to the C&C Sale and $2,380,000 relating to future revenues. The
$2,380,000 of deferred revenues consists of (i) $2,096,000 relating to minimum
take-or-pay commitments for sales of concentrate for C&C products to Kelco and
(ii) $284,000 relating to future technical services to be performed for Kelco by
the Company, both under a contract with Kelco. The excess of the proceeds of
$4,373,000 over the carrying value of the C&C trademark of $1,575,000 and the
related equipment of $2,000 resulted in a pre-tax gain of $2,796,000 which is
being recognized commencing in the third quarter of 1997 pro rata between the
gain on sale and the carrying value of the assets sold based on the cash
proceeds and collections under the Kelco Note since realization of the Kelco
Note is not yet fully assured. Accordingly, a gain of $503,000 was recognized in
"Gain on sale of businesses, net" in the accompanying condensed consolidated
statements of operations for the three months and nine months ended September
28, 1997.
The following unaudited pro forma condensed consolidated statements of
operations of the Company for the year ended December 31, 1996 and the
nine-month period ended September 28, 1997 have been prepared by adjusting such
statements of operations, as derived and condensed, as applicable, from (i) the
consolidated statement of operations in the Form 10-K and (ii) the condensed
consolidated statement of operations appearing herein, respectively, to give
effect to (i) the Sales and (ii) the Acquisition and related transactions, based
on the effect of preliminary estimates of the allocation of the purchase price
of Snapple, as if such transactions had been consummated as of January 1, 1996.
The revenues and expenses of Snapple for the year ended December 31, 1996 and
for the period from January 1, 1997 to the May 22, 1997 Acquisition date (the
"Pre-acquisition Period") have been derived and condensed, as applicable, from
(i) the combined statement of certain revenues and operating expenses included
in the Snapple audited combined financial statements for the year ended December
31, 1996 included in the Company's Form 8-K/A filed with the SEC on August 5,
1997 (the "Form 8-K/A") and (ii) the combination (the "Pre-acquisition
Statement") of (a) the combined statement of certain revenues and operating
expenses included in the Snapple unaudited combined financial statements for the
three months ended March 31, 1997 included in the Form 8-K/A and (b) the Snapple
unaudited combined statement of certain revenues and operating expenses for the
period from April 1, 1997 to May 22, 1997 provided to the Company by Quaker.
Such Pre-acquisition Statement is preliminary and is subject to adjustment upon
completion of an audit currently in process. Such unaudited pro forma condensed
consolidated statements of operations do not purport to be indicative of the
Company's actual results of operations had such transactions actually been
consummated on January 1, 1996 or of the Company's future results of operations
and are as follows (in thousands except per share amounts):
<TABLE>
<CAPTION>
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
AS PRO FORMA
REPORTED SNAPPLE ADJUSTMENTS PRO FORMA
--------- ------- ----------- ---------
(IN THOUSANDS EXCEPT PER SHARE DATA)
(UNAUDITED)
<S> <C> <C> <C> <C>
Revenues:
Net sales......................................$ 931,920 $ 550,800 $ (228,031) (a) $ 1,243,526
444 (g)
(11,607) (h)
Royalties, franchise fees and other
revenues..................................... 57,329 -- 9,121 (b) 66,510
60 (g)
----------- ------------ ------------ ------------
989,249 550,800 (230,013) 1,310,036
----------- ------------ ------------ ------------
Costs and expenses:
Cost of sales.................................. 652,109 352,900 (187,535) (a) 807,354
178 (g)
(10,298) (h)
Advertising, selling and distribution.......... 139,662 188,400 (24,764) (a) 294,770
(1,702) (h)
(6,826) (l)
General and administrative..................... 131,357 93,900 (9,913) (a) 169,588
(434) (h)
(45,322) (m)
Reduction in carrying value of long-lived
assets impaired or to be disposed of......... 64,300 -- (58,900) (a) 5,400
Facilities relocation and corporate
restructuring................................ 8,800 16,600 (2,400) (a) 23,000
----------- ------------ ------------ ------------
996,228 651,800 (347,916) 1,300,112
----------- ------------ ------------ ------------
Operating profit (loss)................... (6,979) (101,000) 117,903 9,924
Interest expense................................... (73,379) -- 8,421 (c) (93,505)
(273) (g)
(28,274) (o)
Gain on sale of businesses, net.................... 77,000 -- -- 77,000
Other income, net.................................. 7,996 -- 16 (h) 8,695
----------- ------------ ------------ ------------
683 (j)
Income (loss) before income taxes
and minority interests.................. 4,638 (101,000) 98,476 2,114
Provision for income taxes......................... (11,294) -- (28,406) (f) (11,321)
(578) (k)
28,957 (p)
Minority interests in income of consolidated
subsidiary..................................... (1,829) -- -- (1,829)
----------- ------------ ------------ ------------
Income (loss) before extraordinary
items..................................$ (8,485) $ (101,000) $ 98,449 $ (11,036)
=========== ============ ============ ============
Income (loss) before extraordinary
items per share........................$ (.28) $ (.37)
=========== ============
</TABLE>
<TABLE>
<CAPTION>
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 28, 1997
PREACQUISITION
AS PERIOD OF PRO FORMA
REPORTED SNAPPLE ADJUSTMENTS PRO FORMA
------- -------------- ----------- ---------
(IN THOUSANDS EXCEPT PER SHARE DATA)
(UNAUDITED)
<S> <C> <C> <C> <C>
Revenues:
Net sales......................................$ 658,942 $ 172,400 $ (74,195) (a) $ 750,271
243 (g)
(7,119) (h)
Royalties, franchise fees and other
revenues..................................... 47,582 -- 2,968 (b) 50,583
33 (g)
----------- ------------ ------------ ------------
706,524 172,400 (78,070) 800,854
----------- ------------ ------------ ------------
Costs and expenses:
Cost of sales.................................. 402,813 100,600 (59,127) (a) 437,970
96 (g)
(6,412) (h)
Advertising, selling and distribution.......... 141,058 58,700 (8,145) (a) 188,205
(401) (h)
(3,007) (l)
General and administrative..................... 108,723 28,200 (3,319) (a) 123,356
(293) (h)
(9,955) (m)
Facilities relocation and corporate
restructuring................................ 7,350 -- (5,597) (a) 1,753
Acquisition related ........................... 32,440 -- -- 32,440
Reduction in carrying value of long-lived
assets impaired or to be disposed of......... -- 1,414,600 (1,414,600) (n) --
----------- ------------ ------------ ------------
692,384 1,602,100 (1,510,760) 783,724
----------- ------------ ------------ ------------
Operating profit (loss)................... 14,140 (1,429,700) 1,432,690 17,130
Interest expense................................... (54,807) -- 2,756 (c) (63,172)
(152) (g)
(10,969) (o)
Gain on sale of business, net...................... 261 -- 2,342 (d) 2,100
(503) (i)
Investment income, net............................. 10,927 -- -- 10,927
Other income, net.................................. 3,603 -- (544) (e) 3,509
381 (j)
69 (h)
Income (loss) before income taxes
and minority interests.................. (25,876) (1,429,700) 1,426,070 (29,506)
Benefit from income taxes.......................... 5,693 -- (3,701) (f) 6,685
14 (k)
4,679 (p)
Minority interests in income of consolidated
subsidiary..................................... (1,223) -- -- (1,223)
----------- ------------ ------------ ------------
Loss before extraordinary items...........$ (21,406) $ (1,429,700) $ 1,427,062 $ (24,044)
=========== ============ ============ ============
Loss before extraordinary items
per share...............................$ (.71) $ (.80)
=========== ============
</TABLE>
RTM Sale Pro Forma Adjustments
(a) To reflect the elimination of the sales, cost of sales, advertising,
selling and distribution expenses and allocated general and administrative
expenses, the reduction in carrying value of long-lived assets impaired or
to be disposed of for the year ended December 31, 1996 related to the sold
Arby's restaurants and the portion of the facilities relocation and
corporate restructuring charge associated with restructuring the restaurant
segment in connection with the RTM Sale. The allocated general and
administrative expenses reflect the portion of the Company's total general
and administrative expenses allocable to the operating results associated
with the restaurants sold as determined by management of the Company. Such
allocated amounts consist of (i) salaries, bonuses, travel and
entertainment expenses, supplies, training and other expenses related to
area managers who had responsibility for the day-to-day operation of the
sold restaurants and (ii) the portion of general corporate overhead (e.g.
accounting, human resources, marketing, etc.) estimated to be avoided as a
result of the Company no longer operating restaurants. Since the Company no
longer owns any Arby's restaurants but continues to operate as the Arby's
franchisor, it undertook a reorganization of its restaurant segment
eliminating 65 positions in its corporate and field administrative offices
and significantly reducing leased office space. The effect of the
elimination of income and expenses of the sold restaurants is significantly
greater in the year ended December 31, 1996 as compared with the nine
months ended September 28, 1997 principally due to two 1996 eliminations
which did not recur in the 1997 period for (i) the $58,900,000 reduction in
carrying value of long-lived assets associated with the restaurants sold
and (ii) depreciation and amortization on the long-lived restaurant assets
sold, which had been written down to their estimated fair values as of
December 31, 1996 and were no longer depreciated or amortized while they
were held for sale.
(b) To reflect royalties on the sales of the sold restaurants through the May
5, 1997 RTM Sale date at the rate of 4%.
(c) To reflect a reduction to interest expense relating to the debt assumed by
RTM.
(d) To reflect the elimination of the $2,342,000 loss on sale of restaurants
recorded in the nine months ended September 28, 1997.
(e) To reflect a $544,000 (only the portion related to the restaurant
headquarters) gain on termination of a portion of the Fort Lauderdale,
Florida headquarters lease for space no longer required by the restaurant
segment as a result of the RTM Sale recorded in the nine months ended
September 28, 1997.
(f) To reflect the income tax effects of the above at the incremental income
tax rate of 38.9%.
C&C Sale Pro Forma Adjustments
(g) To reflect through the date of the C&C Sale (i) realization of deferred
revenues based on the portion of the minimum take-or-pay commitment for
sales of concentrate for C&C products to Kelco to be fulfilled and fees
related to the technical services to be performed, both under the contract
with Kelco, (ii) imputation of interest expense on the deferred revenues
and (iii) recognition of the estimated cost of the concentrate to be sold.
(h) To reflect the elimination of sales, cost of sales, advertising, selling
and distribution expenses, general and administrative expenses and other
expense related to the C&C beverage line.
(i) To reflect the elimination of the $503,000 gain on the C&C Sale recorded in
the nine months ended September 28, 1997.
(j) To reflect accretion of the discount on the Kelco Note.
(k) To reflect the income tax effects of the above at the incremental income
tax rate of 36.6%.
Snapple Acquisition Pro Forma Adjustments
<TABLE>
<CAPTION>
(l) Represents adjustments to "Advertising, selling and distribution" expenses as follows (in thousands):
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, 1996 SEPTEMBER 28, 1997
----------------- ------------------
<S> <C> <C>
To record (reverse) net purchases (depreciation) of
refrigerated display cases expensed when
purchased and placed in service.......................................$ 3,174 $ (879)
To reverse reported take-or-pay expense for obligations
associated with long-term production contracts
as a result of adjustment to fair value............................... (10,000) (2,128)
--------- ---------
$ (6,826) $ (3,007)
========= =========
(m) Represents adjustments to "General and administrative" expenses as follows (in thousands):
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, 1996 SEPTEMBER 28, 1997
----------------- ------------------
To record amortization of trademarks and tradenames of
$210,000 over an estimated life of 35 years...........................$ 6,000 $ 2,334
To record amortization of Goodwill of $88,942 over an
estimated life of 35 years............................................ 2,541 989
To reverse reported amortization of intangibles for which no
amortization was recorded subsequent to March 31, 1997
when they were written down to their estimated fair values............ (54,200) (13,400)
To record amortization relating to the excess of fair value of an
equity investment over the underlying book value
over an estimated life of 35 years.................................... 337 122
--------- ---------
$ (45,322) $ (9,955)
========= =========
(n) To reverse the historical reduction in carrying value of long-lived assets
impaired or to be disposed of for the nine months ended September 28, 1997
in connection with the sale of Snapple to Triarc.
(o) Represents adjustments to "Interest expense" as follows (in thousands):
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, 1996 SEPTEMBER 28, 1997
----------------- ------------------
To record interest expense at weighted average rate of
10.2% on the $330,000 of borrowings at the
Acquisition date under the Credit Agreement...........................$ (33,424) $ (12,811)
To record amortization on $11,200 of deferred financing
costs associated with the Credit Agreement............................ (1,889) (713)
To reverse reported interest expense on Mistic's former
bank facility (see Note 5)............................................ 6,086 2,231
To reverse reported amortization of deferred financing costs
associated with Mistic's former bank facility......................... 953 324
---------- ---------
$ (28,274) $ (10,969)
========== =========
(p) Represents adjustments to "Benefit from (provision for) income taxes" (in thousands):
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, 1996 SEPTEMBER 28, 1997
----------------- -----------------
To reflect an income tax benefit on the adjusted
historical pre-tax loss at 39% (exclusive of
nondeductible Goodwill write-off and/or amortization)
since no income tax benefit is reflected in the
reported historical results of operations..........................$ 26,286 $ 65,208
To reflect the estimated income tax effect of the
above adjustments (exclusive of nondeductible
Goodwill write-off and/or amortization) at 39%...................... 2,671 (60,529)
---------- ---------
$ 28,957 $ 4,679
========== =========
</TABLE>
Integration of Acquisitions
The accompanying pro forma condensed consolidated statements of operations
do not reflect cost savings that the Company believes it will achieve from
changes in operating strategies subsequent to the acquisition of Snapple
and operational synergies with Mistic. Such savings include cost
reductions in domestic advertising and marketing and general and
administrative expenses and more cost-efficient international operations.
With respect to Snapple's domestic advertising, the Company plans to
reduce such expenditures to approximately $1.90 per case from the
pre-Acquisition 1996 level of approximately $2.65 per case through
elimination of programs, such as product giveaways, which it considers
non-effective, and the reduction of advertising development costs
including talent, production and agency costs. The Company believes it can
achieve such levels since the 1996 advertising and marketing levels at
Mistic were approximately $1.56 per case. Domestic general and
administrative expenses are being reduced through space reductions and
elimination of excess personnel. The corporate office facilities related
to Snapple have been reduced from approximately 50,000 square feet at the
Quaker corporate facility to 12,500 square feet at the TBHC facility in
White Plains, New York. Further, the Company has reduced administrative
personnel, facilitated in part by the integration with Mistic. With
respect to international operations, Snapple incurred significant losses
in 1996. The Company intends to rationalize its international advertising
and marketing and general and administrative expenses similar to its
domestic operations in order to eliminate such losses.
SPINOFF TRANSACTIONS
In October 1996 the Company had announced that its Board of Directors
approved a plan to offer up to approximately 20% of the shares of its beverage
and restaurant businesses (then operated through Mistic and RC/Arby's
Corporation, a wholly-owned subsidiary of the Company) to the public through an
initial public offering and to spin off the remainder of the shares of such
businesses to Triarc stockholders (collectively, the "Spinoff Transactions"). In
May 1997 the Company announced it would not proceed with the Spinoff
Transactions as a result of the Acquisition and other complex issues.
(3) INVENTORIES
The following is a summary of the components of inventories (in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 28,
1996 1997
---- ----
<S> <C> <C>
Raw materials...................................................................$ 25,405 $ 36,101
Work in process................................................................. 467 505
Finished goods.................................................................. 29,468 56,964
---------- ----------
$ 55,340 $ 93,570
========== ==========
</TABLE>
(4) PROPERTIES
<TABLE>
<CAPTION>
The following is a summary of the components of properties, net (in
thousands):
DECEMBER 31, SEPTEMBER 28,
1996 1997
---- ----
<S> <C> <C>
Properties, at cost.............................................................$ 224,206 $ 232,527
Less accumulated depreciation and amortization.................................. 116,934 112,535
---------- ----------
$ 107,272 $ 119,992
========== ==========
</TABLE>
(5) LONG-TERM DEBT
The Credit Agreement consists of $300,000,000 of term loans (the "Term
Loans") of which $225,000,000 and $75,000,000 were borrowed by Snapple and
Mistic, respectively, at the Acquisition date ($223,687,000 and $74,563,000,
respectively, outstanding at September 28, 1997) and a revolving credit line
which provides for up to $80,000,000 of revolving credit loans (the "Revolving
Loans") by Snapple, Mistic or TBHC of which $25,000,000 and $5,000,000 were
borrowed on the Acquisition date by Snapple and Mistic, respectively. No
Revolving Loans were outstanding at September 28, 1997. The aggregate
$250,000,000 borrowed by Snapple was principally used to fund a portion of the
purchase price for Snapple (see Note 2). The aggregate $80,000,000 borrowed by
Mistic was principally used to repay all of the $70,850,000 then outstanding
borrowings under Mistic's former bank credit facility plus accrued interest
thereon. Borrowings under the Credit Agreement bear interest, at the Company's
option, at rates based on either the 30, 60, 90 or 180-day London Interbank
Offered Rate ("LIBOR") (ranging from 5.66% to 5.84% at September 28, 1997) or an
alternate base rate (the "ABR"). The ABR (8 1/2% at September 28, 1997)
represents the higher of the prime rate or 1/2% over the Federal funds rate.
Revolving Loans and one of the Term Loans with an outstanding balance of
$98,750,000 at September 28, 1997 bear interest at 2 1/2% over LIBOR or 1 1/4%
over ABR until February 1998, at which time such margins are subject to downward
adjustment by up to 1% based on the respective borrowers' leverage ratio, as
defined. The other two Term Loans each with outstanding balances of $99,750,000
at September 28, 1997 bear interest at 3% and 3 1/4%, respectively, over LIBOR
or 2 1/4% and 2 1/2%, respectively, over the ABR. At September 28, 1997 the
outstanding Term Loans bear interest at a weighted average rate of 8.67%. The
borrowing base for Revolving Loans is the sum of 80% of eligible accounts
receivable and 50% of eligible inventory. The Term Loans are due $1,750,000
during the remainder of 1997, $9,500,000 in 1998, $14,500,000 in 1999,
$19,500,000 in 2000, $24,500,000 in 2001, $27,000,000 in 2002, $61,000,000 in
2003, $94,000,000 in 2004 and $46,500,000 in 2005 and any Revolving Loans would
be due in full in June 2003. The Borrowers must also make mandatory prepayments
in an amount equal to 75% of excess cash flow, as defined. The Credit Agreement
contains various covenants which, among other matters, require meeting certain
financial amount and ratio tests and prohibit dividends. Substantially all of
the assets of Snapple and Mistic and the common stock of Snapple, Mistic and
TBHC are pledged as security for obligations under the Credit Agreement.
(6) STOCKHOLDERS' EQUITY
On March 20, 1997 the Company granted 1,227,000 stock options at an option
price of $12.54 which was below the $14.75 fair market value of the Class A
common stock at such date representing an aggregate difference of $2,712,000.
Such amount was recorded as an addition to unearned compensation (included in
"Other stockholders' equity (deficit)" in the accompanying condensed
consolidated balance sheets) and is being amortized as compensation expense over
the vesting period of one to three years from the date of grant.
(7) FACILITIES RELOCATION AND CORPORATE RESTRUCTURING
The facilities relocation and corporate restructuring charges in the
nine-month period ended September 28, 1997 principally consist of employee
severance and related termination costs and employee relocation associated with
restructuring the restaurant segment in connection with the RTM Sale and, to a
lesser extent, costs associated with the relocation of the Fort Lauderdale,
Florida headquarters of Royal Crown Company, Inc. ("Royal Crown"), a
wholly-owned subsidiary of the Company, which is being centralized in the White
Plains, New York headquarters of TBHC.
(8) ACQUISITION RELATED COSTS
The Acquisition related costs in the nine-month period ended September 28,
1997 consist of the following (in thousands):
<TABLE>
<CAPTION>
<S> <C>
Write down glass front vending machines based on the Company's change in estimate of their
value considering the Company's plans for their future use..........................................$ 13,826
Provide additional reserves for legal matters based on the Company's change in estimate of
the amounts required reflecting its plans and estimates of costs to resolve such matters............ 6,697
Provide for certain costs in connection with the successful consummation of the Acquisition
($3,000) and the Mistic refinancing in connection with entering into the Credit
Agreement ($1,000).................................................................................. 4,000
Provide for fees paid to Quaker pursuant to a transition services agreement............................. 2,819
Reflects the portion of promotional expenses relating to the Pre-Acquisition Period as a result of
the Company's current operating expectations........................................................ 2,510
Provide for costs, principally for independent consultants, incurred in connection with the
conversion of Snapple to the Company's operating and financial information systems.................. 1,603
Provide additional reserve for doubtful accounts based on the Company's change in
estimate of the related write-off to be incurred.................................................... 985
----------
$ 32,440
==========
</TABLE>
(9) GAIN ON SALES OF BUSINESSES, NET
The "Gain on sales of businesses, net" in the 1997 periods consists of (i)
$2,100,000 of gain from the receipt by Triarc of distributions from the
Partnership (see below) in excess of Triarc's equity in the earnings of the
Partnership and (ii) $503,000 of gain on the C&C Sale (see Note 2), both
recognized in the third quarter of 1997 and partially offset in the nine-month
period ended September 28, 1997 by a $2,342,000 loss on the RTM Sale (see Note
2) recognized in the second quarter of 1997.
The "Gain on sale of businesses, net" in the 1996 periods consists of (i)
a pre-tax loss from the sale of the Company's textile business (an estimated
$500,000 in the second quarter of 1996 and an additional $3,500,000 in the third
quarter of 1996), (ii) a pre-tax gain from the sale of units in a partnership
formed by the Company's propane business ($83,448,000 in the third quarter of
1996) and (iii) a pre-tax loss associated with the write-down of MetBev, Inc.
("MetBev") of $2,825,000 in the third quarter of 1996 (see below).
As disclosed in Note 28 to the consolidated financial statements contained
in the Form 10-K, the Company had an investment in and a revolving credit
agreement with MetBev, an entity in which the Company had invested to upgrade
the Company's distribution capability in New York City and certain surrounding
counties. Under the revolving credit agreement the Company had cumulative
advances to MetBev aggregating $3,625,000 as of September 30, 1996 of which
$800,000 was written off in 1995. MetBev continued to incur significant losses
in 1996 and had a stockholders' deficit as of September 30, 1996 of $7,209,000.
Accordingly, during the third quarter of 1996 the Company wrote off its
remaining investment in MetBev consisting of the remaining $2,825,000 of
advances.
SALE OF TEXTILE BUSINESS
On April 29, 1996, the Company completed the sale (the "Graniteville
Sale") of its textile business segment other than the specialty dyes and
chemical business of C.H. Patrick & Co., Inc., a wholly-owned subsidiary of the
Company, and certain other excluded assets and liabilities (the "Textile
Business") to Avondale Mills, Inc. for $236,824,000 in cash, net of expenses and
post-closing adjustments. As a result of the Graniteville Sale, the Company
recorded a pre-tax loss of $4,000,000 included in "Gain on sale of businesses,
net" ($500,000 (including an $8,367,000 write-off of unamortized Goodwill which
has no tax benefit) and $3,500,000 in the second and third quarters of 1996,
respectively), and an income tax provision of $1,700,000 (a $3,000,000 provision
and a $1,300,000 benefit in the second and third quarters of 1996,
respectively), exclusive of an extraordinary charge relating to the early
extinguishment of debt included in the charges described in Note 11. At the
closing of the Graniteville Sale, $191,438,000 of long-term debt of the textile
segment was repaid. See Note 19 to the consolidated financial statements in the
Form 10-K for further discussion of the Graniteville Sale.
The results of operations of the Textile Business have been included in
the accompanying condensed consolidated statement of operations for the
nine-month period ended September 30, 1996 through April 29, 1996. See below
under "Sale of Propane Business" for supplemental pro forma condensed
consolidated summary operating data of the Company for the nine-month period
ended September 30, 1996 giving effect to the Graniteville Sale and the
repayment of related debt.
SALE OF PROPANE BUSINESS
In July and November 1996 National Propane Partners L.P. (the
"Partnership") a limited partnership organized in 1996 to acquire, own and
operate the propane business (the "Propane Business") of National Propane
Corporation ("National Propane"), a wholly-owned subsidiary of the Company,
consummated offerings (the "Offerings") of units in the Partnership. The
Offerings comprised an aggregate 6,701,550 common units representing limited
partner interests (the "Common Units"), representing an approximate 57.3%
interest in the Partnership, for an offering price of $21.00 per Common Unit
aggregating $124,749,000 net of underwriting discounts and commissions and other
expenses related to the Offerings. The sale of the Common Units resulted in a
pre-tax gain to the Company in the third quarter of 1996 of $83,448,000 before a
provision for income taxes of $32,541,000. In connection with the Offerings, in
July 1996 $125,000,000 of long-term debt associated with the Propane Business
was issued and $128,469,000 of existing debt of the Propane Business was repaid
(collectively with the formation of the Partnership, the Offerings and certain
related transactions, the "Propane Transactions"). See Notes 13 and 19 to the
consolidated financial statements in the Form 10-K for further discussion of the
Propane Transactions.
The following unaudited supplemental pro forma condensed consolidated
summary operating data of the Company for the nine-month period ended September
30, 1996 gives effect to (i) the Graniteville Sale and the repayment of related
debt (see above) and the Propane Transactions, as if such transactions had been
consummated as of January 1, 1996. The pro forma effects of the Propane
Transactions include (i) the addition of the estimated stand-alone general and
administrative costs associated with the operation of the Propane Business as a
partnership, (ii) net decreases to interest expense principally reflecting the
elimination of interest expense on the $128,469,000 of refinanced debt of the
Propane Business partially offset by the interest expense associated with
$125,000,000 of new debt and (iii) the net benefit from income taxes and
increase in minority interests in income of consolidated subsidiaries resulting
from the effects of the above transactions and other related transactions which
do not affect consolidated pre-tax earnings. Such pro forma information does not
purport to be indicative of the Company's actual results of operations had such
transactions actually been consummated on January 1, 1996 or of the Company's
future results of operations and are as follows (in thousands except per share
amounts):
<TABLE>
<CAPTION>
<S> <C>
Revenues....................................................................................$ 633,808
Operating profit............................................................................ 47,720
Income before extraordinary items........................................................... 45,448
Income before extraordinary items per share................................................. 1.52
</TABLE>
(10) INCOME TAXES
The Federal income tax returns of the Company have been examined by the
Internal Revenue Service (the "IRS") for the tax years 1989 through 1992 and the
IRS had issued notices of proposed adjustments prior to 1997 increasing taxable
income by approximately $145,000,000. Triarc has resolved approximately
$102,000,000 of such proposed adjustments and in connection therewith, the
Company has paid $5,298,000, including interest, thus far in November 1997 and
expects to pay later in November 1997 an additional amount of approximately
$8,500,000, including interest, which aggregate amounts have been fully reserved
in prior years. The Company intends to contest the unresolved adjustments of
approximately $43,000,000, the tax effect of which has not yet been determined,
at the appellate division of the IRS. The Company believes that adequate
aggregate provisions have been made principally in years prior to 1997 for any
tax liabilities, including interest, that may result from the resolution of
these contested adjustments and other tax matters.
(11) EXTRAORDINARY ITEMS, NET
In connection with the early extinguishment or assumption of (i) the
Company's 11 7/8% senior subordinated debentures due February 1, 1998, in
February 1996, (ii) all of the debt of the Textile Business, including its
credit facility, in connection with the sale of the Textile Business in April
1996 (see Note 9), (iii) almost all of the long-term debt of National Propane
including National Propane's existing credit facility on July 2, 1996 (see Note
9), (iv) a 9 1/2% promissory note payable with an outstanding balance of
$36,487,000 (including accrued interest of $1,790,000) for cash of $27,250,000
on July 1 1996, (v) $54,620,000 of mortgage and equipment notes payable assumed
by RTM in connection with the RTM Sale in May 1997 (see Note 2) and (vi) the
obligations under the former Mistic credit facility in May 1997 (see Note 5),
the Company recognized extraordinary charges consisting of the following (in
thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, 1996 SEPTEMBER 30, 1996 SEPTEMBER 28, 1997
------------------ ------------------ ------------------
<S> <C> <C> <C>
Write-off of unamortized deferred financing costs.....................$ (4,126) $ (10,469) $ (4,839)
Write-off of unamortized original issue discount...................... -- (1,776) --
Prepayment penalties.................................................. (225) (5,744) --
Fees.................................................................. (250) (250) --
Discount from principal on early extinguishment....................... 9,237 9,237 --
---------- ----------- -------
4,636 (9,002) (4,839)
Income tax (provision) benefit........................................ (1,514) 3,586 1,885
---------- ----------- --------
$ 3,122 $ (5,416) $ (2,954)
========== =========== ========
</TABLE>
(12) INCOME (LOSS) PER SHARE
The shares for income (loss) per share purposes were 32,405,000 and
29,906,000 for the three and nine-month periods ended September 30, 1996 and
32,821,000 and 29,959,000 for the three and nine-month periods ended September
28, 1997, respectively. Such shares represent the weighted average shares
outstanding plus, with respect to the three-month periods ended September 30,
1996 and September 28, 1997, 2,519,000 and 2,805,000 shares, respectively, for
the effect of dilutive stock options. Net income for income per share purposes
for the three-month periods ended September 30, 1996 and September 28, 1997 has
been increased by $1,335,000 and $382,000, respectively, from the assumed
reduction in interest expense, net of income taxes, resulting from the
utilization of the proceeds from the assumed exercise of certain stock options
to repurchase debt and eliminate the related interest expense. Fully diluted
income (loss) per share is not applicable for any period since contingent
issuances of common shares would have been antidilutive or had no effect on
income (loss) per share.
(13) TRANSACTIONS WITH RELATED PARTIES
The Company continues to lease aircraft owned by Triangle Aircraft
Services Corporation ("TASCO"), a company owned by the Chairman and Chief
Executive Officer (the "Chairman") and the President and Chief Operating Officer
of the Company (collectively with the Chairman, the "Executives") for annual
rent as indexed for annual cost of living adjustments which as of May 21, 1997
was increased to $3,258,000 from $2,008,000 in accordance with an amendment to
the lease. Also in accordance with such amendment, the Company paid TASCO
$2,500,000 in 1997 for (i) an option to continue the lease for an additional
five years effective September 30, 1997 and (ii) the agreement by TASCO to
replace one of the aircraft covered under the lease. Such $2,500,000 is being
amortized to rental expense over the five-year period commencing October 1,
1997. In connection with such lease the Company had rent expense of $1,955,000
for the nine-month period ended September 28, 1997. Pursuant to this
arrangement, the Company also pays the operating expenses of the aircraft
directly to third parties.
(14) LEGAL AND ENVIRONMENTAL MATTERS
In July 1993 APL Corporation ("APL"), which was affiliated with the
Company until an April 1993 change in control, became a debtor in a proceeding
under Chapter 11 of the Federal Bankruptcy Code. In February 1994 the official
committee of unsecured creditors of APL filed a complaint (the "APL Litigation")
against the Company and certain companies formerly or presently affiliated with
Victor Posner, the former Chief Executive Officer of the Company ("Posner"), or
with the Company, alleging causes of action arising from various transactions
allegedly caused by the named former affiliates. The complaint asserted various
claims and sought an undetermined amount of damages from the Company, as well as
certain other relief. In June 1997 Triarc entered into a settlement agreement
with Posner and two affiliated entities (including APL) pursuant to which, among
other things, (i) Posner and an affiliate paid $2,500,000 to the Company and
(ii) the APL Litigation was dismissed.
Prior to the Graniteville Sale (see Note 9) TXL Corp. ("TXL"), a
wholly-owned subsidiary of the Company and the former operator of the Textile
Business, was involved in two environmental matters. In connection with the
Graniteville Sale, the Company agreed to indemnify the purchaser for certain
costs, if any, in connection with those costs that are in excess of the reserves
at the time of sale, subject to certain limitations. In one of the matters,
contamination was discovered in a pond near Graniteville, South Carolina and the
South Carolina Department of Health and Control ("DHEC") asserted that TXL may
be one of the parties responsible for such contamination. In connection
therewith, no actions were required other than continued monitoring of sediments
in the pond. In the other matter, TXL owned a property that in prior years was
used as a landfill and operated jointly by TXL and the county government that
may have received municipal waste and possibly industrial waste from TXL as well
as sources other than TXL. As a result of actions by the United States
Environmental Protection Agency and DHEC, TXL proposed to conduct a study of the
landfill, the cost of which was estimated to be not more than $150,000. Such
study had not been approved and, accordingly, had not commenced as of the date
of the Graniteville Sale and the Company has not been advised of any such
actions by the purchaser of the Textile Business. With respect to both of these
matters, the Company has not been informed by the purchaser of any costs subject
to reimbursement.
As a result of certain environmental audits in 1991, Southeastern Public
Service Company ("SEPSCO"), a wholly-owned subsidiary of the Company, 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. In addition, 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 some instances of certain contaminated soils. Remediation is required
at thirteen sites which were sold to or leased by the purchaser of the ice
operations. Remediation has been completed on ten of these sites and is ongoing
at three others. Such remediation is being made in conjunction with the
purchaser who has satisfied its obligation to pay up to $1,000,000 of such
remediation costs. Remediation is also required at seven cold storage sites
which were sold to the purchaser of the cold storage operations. Remediation has
been completed at one site and is ongoing at four other sites. Remediation is
expected to commence on the remaining two sites in 1998 and 1999. Such
remediation is being made in conjunction with the 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
operations. Of these, eleven have been remediated through September 28, 1997 at
an aggregate cost of $1,035,000. In addition, SEPSCO is aware of one plant which
may require demolition in the future.
In May 1994 National (the entity representative of both the operations of
National Propane prior to the Propane Transactions and the Partnership
subsequent thereto - see Note 9) was informed of coal tar contamination which
was discovered at one of its properties in Wisconsin. National purchased the
property from a company (the "Successor") which had purchased the assets of a
utility which had previously owned the property. National believes that the
contamination occurred during the use of the property as a coal gasification
plant by such utility. In order to assess the extent of the problem, National
engaged environmental consultants in 1994. As of November 1, 1997, National's
environmental consultants have begun but not completed their testing. Based upon
information compiled to date which is not yet complete, it appears the likely
remedy will involve treatment of groundwater and treatment of the soil,
installation of a soil cap and, if necessary, excavation, treatment and disposal
of contaminated soil. As a result, the environmental consultants' current range
of estimated costs for remediation is from $764,000 to $1,559,000. National will
have to agree upon the final plan with the state of Wisconsin. Since receiving
notice of the contamination, National has engaged in discussions of a general
nature concerning remediation with the state of Wisconsin. These discussions are
ongoing and there is no indication as yet of the time frame for a decision by
the state of Wisconsin or the method of remediation. Accordingly, the precise
remediation method to be used is unknown. Based on the preliminary results of
the ongoing investigation, there is a potential that the contaminants may extend
to locations downgradient from the original site. If it is ultimately confirmed
that the contaminant plume extends under such properties and if such plume is
attributable to contaminants emanating from the Wisconsin property, there is the
potential for future third-party claims. National is also engaged in ongoing
discussions of a general nature with the Successor. The Successor has denied any
liability for the costs of remediation of the Wisconsin property or of
satisfying any related claims. However, National, if found liable for any of
such costs, would still attempt to recover such costs from the Successor.
National has notified its insurance carriers of the contamination, the likely
incurrence of costs to undertake remediation and the possibility of related
claims. Pursuant to a lease related to the Wisconsin facility, the Partnership
has agreed to be liable for any costs of remediation in excess of amounts
recovered from the Successor or from insurance. However, should the Company be
required to incur any costs related to this matter above those already accrued
for, the net charge to operations would be limited to 43% of any such charge
representing its ownership interest in the Partnership (since November 1996).
Since the remediation method to be used is unknown, no amount within the cost
ranges provided by the environmental consultants can be determined to be a
better estimate.
In 1993 Royal Crown became aware of possible contamination from
hydrocarbons in groundwater at two abandoned bottling facilities. Tests have
confirmed hydrocarbons in the groundwater at both of the sites and remediation
has commenced. Management estimates that total remediation costs will be
approximately $865,000, with approximately $275,000 to $310,000 expected to be
reimbursed by the State of Texas Petroleum Storage Tank Remediation Fund at one
of the two sites, of which approximately $675,000 has been expended to date.
In 1994 Chesapeake Insurance Company Limited ("Chesapeake Insurance"), a
wholly-owned subsidiary of the Company and SEPSCO invested approximately
$5,100,000 in a joint venture with Prime Capital Corporation ("Prime").
Subsequently in 1994, SEPSCO and Chesapeake Insurance terminated their
investments in such joint venture. In March 1995 three creditors of Prime filed
an involuntary bankruptcy petition under the Federal bankruptcy code against
Prime. In November 1996 the bankruptcy trustee appointed in the Prime bankruptcy
case made a demand on Chesapeake Insurance and SEPSCO for return of the
approximate $5,300,000. In January 1997 the bankruptcy trustee commenced
adversary proceedings against Chesapeake Insurance and SEPSCO seeking the return
of the approximate $5,300,000 allegedly received by Chesapeake Insurance and
SEPSCO during 1994 and alleging such payments from Prime were preferential or
constituted fraudulent transfers. In October 1997 the parties agreed to a
settlement of the actions, subject to the bankruptcy court's approval, whereby
SEPSCO and Chesapeake Insurance would collectively return $3,550,000 and waive
all further claims to money distributed out of the Prime bankruptcy estate.
On February 19, 1996, Arby's Restaurantes S.A. de C.V. ("AR"), the master
franchisee of Arby's Inc. ("Arby's"), a wholly-owned subsidiary of the Company,
in Mexico, commenced an action in the civil court of Mexico against Arby's for
breach of contract. AR alleged that a non-binding letter of intent dated
November 9, 1994 between AR and Arby's constituted a binding contract pursuant
to which Arby's had obligated itself to repurchase the master franchise rights
from AR for $2,850,000 that Arby's had breached a master development agreement
with AR. Arby's commenced an arbitration proceeding since the franchise and
development agreements each provided that all disputes thereunder were to be
resolved by arbitration. In September 1997, the arbitrator ruled that (i) the
November 9, 1994 letter of intent was not a binding contract and (ii) the master
development agreement was properly terminated. AR has the right to challenge the
arbitrator's decision. In May 1997, AR commenced an action against Arby's in the
United States District Court for the Southern District of Florida alleging that
(i) Arby's had engaged in fraudulent negotiations with AR in 1994-1995, in order
to force AR to sell the master franchise rights for Mexico to Arby's cheaply and
(ii) Arby's had tortiously interfered with an alleged business opportunity that
AR had with a third party. Arby's has moved to dismiss that action. Arby's is
vigorously contesting AR's various claims and believes it has meritorious
defenses to such claims.
On June 3, 1997, ZuZu, Inc. ("ZuZu") and its subsidiary, ZuZu Franchising
Corporation ("ZFC"), commenced an action against Arby's and Triarc in the
District Court of Dallas County, Texas alleging that Arby's and Triarc conspired
to steal the ZuZu Speedy Tortilla concept and convert it to their own use. ZuZu
seeks injunctive relief and actual damages in excess of $70,000,000 and punitive
damages of not less than $200,000,000 against Triarc for its alleged
appropriation of trade secrets, conversion and unfair competition. ZFC also made
a demand for arbitration with the Dallas, Texas office of the American
Arbitration Association ("AAA") seeking unspecified monetary damages from
Arby's, alleging that Arby's had breached a master franchise agreement between
ZFC and Arby's. Arby's and Triarc have moved to dismiss or, in the alternative,
abate the Texas court action on the ground that a stock purchase agreement
between Triarc and ZuZu required that disputes be subject to mediation in
Wilmington, Delaware and that any litigation be brought in the Delaware courts.
On July 16, 1997, Arby's and Triarc commenced a declaratory judgment action
against ZuZu and ZFC in Delaware Chancery Court for New Castle County seeking a
declaration that the claims in both the litigation and the arbitration must be
subject to mediation in Wilmington, Delaware. In the arbitration proceeding,
Arby's has asserted counterclaims against ZuZu for unjust enrichment, breach of
contract and breach of the duty of good faith and fair dealing and has
successfully moved to transfer the proceeding to the Atlanta, Georgia office of
the AAA. The parties have agreed to suspend further proceedings pending
non-binding mediation. Arby's and Triarc are vigorously contesting plaintiffs'
claims in both the litigation and the arbitration and believe that plaintiffs'
various claims are without merit.
Snapple and Quaker are defendants in a breach of contract case filed on
April 16, 1997 in Rhode Island Superior Court by Rhode Island Beverage Packing
Company, L.P. ("RIB"), prior to the Acquisition. RIB and Snapple disagree as to
whether the co-packing agreement between them had been amended to a) change the
end of the term from December 30, 1997 to December 30, 1999 and b) more than
double Snapple's take-or-pay obligations thereunder. RIB sets forth various
causes of action in its complaint. RIB seeks reformation of the contract,
compliance with promises, consequential damages including lost profits,
attorney's fees and punitive damages. On June 16, 1997, Snapple and Quaker filed
an answer to the complaint in which they denied all liability to RIB, denied the
material allegations of the complaint and raised various affirmative defenses.
Snapple and RIB have reached an agreement in principle to settle this action and
certain other outstanding issues among the parties. There can be no assurance
that such a settlement will be finalized.
In the second and third quarters of 1997, four purported class and
shareholder derivative actions were commenced against certain current and former
directors of the Company (and naming the Company as a nominal defendant). The
complaints allege, among other things, that the defendants breached their
fiduciary duties in allowing certain bonuses and stock options (collectively,
the "Grants") to be granted to the Executives in 1994 and subsequent years, that
the Grants were contrary to the Company's 1994 proxy statement and, in the case
of two of the four actions, that such proxy statement misrepresented or omitted
material facts. The complaints seek, among other things, rescission of certain
stock options granted to the Executives and repayment to the Company by the
Executives of certain bonuses paid to them. The defendants have (i) moved to
dismiss one complaint, (ii) filed an answer generally denying the material
allegations of and asserting affirmative defenses to another complaint, (iii)
opposed the plaintiffs' voluntary notice of dismissal in another complaint and
(iv) not yet responded to a fourth complaint. On October 22, 1997 five former
directors of Triarc who are named as defendants in one of the above actions
filed an answer and cross-claim against the Company and the Chairman alleging,
among other things, certain violations by the Chairman and seeks, among other
items, an unspecified amount of damages. The Company will vigorously contest the
claims of the former directors and believes that such claims are without merit.
The Company has made provisions for legal and environmental matters during
the nine months ended September 28, 1997 and in prior years and has remaining
aggregate accruals of approximately $11,400,000. Based on currently available
information and given (i) the indemnification limitations with respect to the
SEPSCO cold storage operations and the TXL environmental matters, (ii) the
Company's responsibility for only 43% of the Partnership's environmental matter
representing its ownership in the Partnership (since November 1996), (iii)
potential reimbursements by other parties as discussed above and (iv) the
Company's aggregate reserves for such legal and environmental matters, the
Company believes that the legal and environmental matters referred to above, as
well as ordinary routine litigation incidental to its businesses, will not have
a material adverse effect on its consolidated results of operations or financial
position.
(15) SUBSEQUENT EVENT
CABLE CAR ACQUISITION
On June 24, 1997 the Company entered into a definitive merger agreement
(the "Merger Agreement") with Cable Car Beverage Corporation ("Cable Car"), a
distributor of beverages, principally Stewart's brand soft drinks, whereby
Triarc will issue shares of its Class A common stock for all of the outstanding
stock of Cable Car (the "Cable Car Acquisition") at a ratio of 0.1722 Triarc
shares for each outstanding common share of Cable Car subject to downward or
upward adjustment if the average market price of Triarc common stock exceeds $24
1/2 or is less than $18 7/8, respectively, for the fifteen trading days prior to
the closing. The acquisition will be accounted for under the purchase method of
accounting. The preliminary estimated cost of the acquisition is $41,639,000
consisting of (i) the assumed value of $38,098,000 of approximately 1,567,000
Triarc common shares to be issued based on the closing market price on November
5, 1997 of $24 5/16 for Triarc common stock (the "November 5, 1997 Market
Price"), (ii) the assumed value of $2,891,000 (based upon the November 5, 1997
Market Price) of 155,411 options to purchase an equal number of shares of Triarc
common stock with below market option prices to be issued in exchange for all of
the outstanding Cable Car options (as of the assumed issuance date of November
5, 1997) and (iii) an estimated $650,000 of costs to be incurred related to the
acquisition. The acquisition is currently expected to close by the end of
November 1997 and is subject to the approval of Cable Car's shareholders who are
scheduled to vote on a proposal to approve the Merger Agreement on November 25,
1997.
The following table, however, sets forth summarized financial information
of Cable Car for the year ended December 31, 1996 and the nine months ended
September 30, 1997 derived from its annual report on Form 10-K and its quarterly
report on Form 10-Q, respectively.
<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, 1996 SEPTEMBER 30, 1997
----------------- ------------------
(IN THOUSANDS)
<S> <C> <C>
Total revenues.................................................$ 18,873 $ 20,509
Operating income............................................... 2,011 2,261
Net income..................................................... 1,257 1,209
Total assets (as of period end)................................ 7,142 9,989
Shareholders' equity (as of period end)........................ 5,982 7,634
</TABLE>
TRIARC COMPANIES, INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
INTRODUCTION
This "Management's Discussion and Analysis of Financial Condition and
Results of Operations" should be read in conjunction with "Item 7. -
Management's Discussion and Analysis of Financial Condition and Results of
Operations" in the Annual Report on Form 10-K, as amended, for the year ended
December 31, 1996 (the "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. However, following
the sale of all of the 355 company-owned Arby's restaurants on May 5, 1997 (the
"RTM Sale") to an affiliate of RTM, Inc. ("RTM"), the largest franchisee in the
Arby's system (see below under "Liquidity and Capital Resources"), the effects
of the trends on the restaurant segment are limited to their impact on franchise
fees and royalties. Certain statements under this caption constitute
"forward-looking statements" under the Private Securities Litigation Reform Act
of 1995. See "Part II - Other Information" preceding "Item 1".
Effective January 1, 1997 the Company changed its fiscal year from a
calendar year to a year consisting of 52 or 53 weeks ending on the Sunday
closest to December 31. In accordance therewith, in 1997 the Company's third
quarter commenced on June 30 and ended on September 28 and the nine months ended
September 28 commenced on January 1 and are referred to herein as the three
months ended September 28, 1997 or the 1997 third quarter and the nine months
ended September 28, 1997, respectively.
RESULTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 28, 1997 COMPARED WITH NINE MONTHS ENDED SEPTEMBER
30, 1996
<TABLE>
<CAPTION>
REVENUES OPERATING PROFIT (LOSS)
NINE MONTHS ENDED NINE MONTHS ENDED
--------------------- ------------------------
SEPTEMBER SEPTEMBER SEPTEMBER SEPTEMBER
30, 1996 28, 1997 30, 1996 28, 1997
-------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Beverages.....................................................$ 249,612 $ 416,239 $ 22,044 $ (2,588)
Restaurants................................................... 213,208 121,779 11,948 17,801
Propane ...................................................... 116,018 117,987 7,817 6,614
Textiles...................................................... 202,979 50,519 13,765 4,857
Unallocated general corporate expenses........................ -- -- (1,059) (a) (12,544) (b)
---------- ---------- -------- ----------
$ 781,817 $ 706,524 $ 54,515 $ 14,140
========== ========== ======== ==========
</TABLE>
(a) Net of a $3.0 million release of casualty insurance reserves.
(b) The $11.5 million increase from the 1996 period reflects, in
addition to cost increases, the nonrecurring $3.0 million of
income in the 1996 period noted in (a) above and fixed expenses
which are no longer being charged as management fees by Triarc
to (i) the Textile Business subsequent to its April 1996 sale
(see below) and (ii) the propane segment subsequent to its
initial public offering and operation as a partnership
beginning in July 1996 (see below), both partially offset by
management fees charged to Snapple (see below) subsequent to
its acquisition in May 1997.
Revenues decreased $75.3 million to $706.5 million in the nine months ended
September 28, 1997 principally reflecting the 1996 sales associated with the
Company's textile business segment other than its specialty dyes and chemicals
business and certain other excluded assets and liabilities (the "Textile
Business") sold on April 29, 1996 (see further discussion in the Form 10-K) and
nonrecurring sales of the restaurant segment for the period May 5, 1996 through
September 30, 1996 resulting from the RTM Sale on May 5, 1997 as compared with a
full nine months of sales in the 1996 period, both partially offset by sales in
the nine months ended September 28, 1997 associated with Snapple Beverage Corp.
("Snapple"), a producer and seller of premium beverages acquired by the Company
from The Quaker Oats Company ("Quaker") on May 22, 1997 (see further discussion
below under "Liquidity and Capital Resources"). Aside from the effects of these
transactions, revenues decreased $22.6 million. A discussion of such change in
revenues by segment is as follows:
Beverages - Aside from the effect of the Snapple acquisition in the
1997 period, revenues decreased $32.8 million (13.1%) due to decreases
in sales of finished goods ($24.5 million) and concentrate ($8.3
million). The decrease in sales of finished goods principally reflects
(a) the absence in the 1997 period of 1996 sales to MetBev, Inc.
("MetBev"), a former distributor of the Company's beverage products in
the New York City metropolitan area, and a volume decrease in sales of
branded finished products of Royal Crown Company, Inc. ("Royal Crown"),
a wholly-owned subsidiary of the Company, in areas other than those
serviced by MetBev (where the Company now sells concentrate rather than
finished goods), lower sales of premium beverages exclusive of Snapple,
a volume decrease in sales of the C&C beverage line of mixers, colas
and flavors (where the Company now sells concentrate to the purchaser
of the C&C beverage line rather than finished goods), the rights to
which (including the C&C trademark) were sold in July 1997 (the "C&C
Sale") as described below and (d) a volume reduction in the sales of
finished Royal Crown Premium Draft Cola ("Draft Cola") which the
Company no longer sells. Sales of concentrate decreased, despite the
shift in sales to concentrate from finished goods noted above,
principally reflecting a decrease in branded sales due to volume
declines, which were adversely affected by soft bottler case sales,
partially offset by a higher average concentrate selling price.
Restaurants - Aside from the effect of the RTM Sale, revenues increased
$3.2 million (2.7%) to $121.8 million due to a $5.7 million (13.6%)
increase in royalties and franchise fees partially offset by a $2.5
million (3.2%) decrease in net sales of company-owned Arby's
restaurants. The increase in royalties and franchise fees is due to (i)
incremental royalties for the period from May 5, 1997 through September
28, 1997 from the 355 restaurants sold to RTM, (ii) an average net
increase of 75 (2.9%) franchised restaurants other than from the RTM
Sale and (iii) a 1.5% increase in same-store sales of franchised
restaurants. The decrease in net sales of company-owned restaurants is
primarily attributed to a decrease in the number of company-owned
Arby's restaurants prior to the RTM Sale.
Propane - Revenues increased $2.0 million (1.7%) due to the effect of
higher selling prices from passing on to customers a substantial
portion of the increased product costs resulting from the record high
propane costs this past heating season partially offset by (i) the
effect of lower propane volume reflecting warmer weather in the 1997
period and customer energy conservation due to the higher propane
selling prices which factors were partially offset by sales volume from
acquisitions of propane distributorships and the opening of new service
centers and (ii) a decrease in revenues from other product lines.
Textiles (including specialty dyes and chemicals) - Aside from the
effect of the sale of the Textile Business, overall revenues of the
specialty dyes and chemicals business decreased $4.5 million (8.1%),
reflecting price competition pressures and a cyclical downturn in the
denim segment of the textile industry in which the Company's dyes are
used, while revenues of this business reported in consolidated "Net
sales" in the accompanying condensed consolidated statements of
operations increased $5.0 million (11.1%) to $50.5 million in the 1997
period due to the full period effect of revenues from sales to the
purchaser of the Textile Business subsequent to the April 29, 1996 sale
of such business which were no longer eliminated in consolidation as
intercompany sales.
Gross profit (total revenues less cost of sales) increased $46.0 million
to $303.7 million in the nine months ended September 28, 1997 reflecting in part
the gross profit in the nine months ended September 28, 1997 associated with
Snapple partially offset by the nonrecurring 1996 gross profit associated with
the Textile Business and the company-owned Arby's restaurants sold to RTM. Aside
from the effects of these transactions, gross profit decreased $6.2 million due
to the overall lower revenues discussed above. A discussion of the changes in
gross margins by segment, which increased in the aggregate to 43.3% from 42.6%
aside from the effects of the transactions noted above, is as follows:
Beverages - Aside from the effect of the Snapple acquisition in the
1997 period, margins increased to 57.0% from 53.2% principally due to
(i) the recognition in the 1997 period of a guarantee to the Company of
certain minimum gross profit levels on sales to the Company's private
label customer, recorded as a reduction to cost of sales, for which
no similar amount was recognized in the 1996 comparable period
and (ii) the shift in product mix to higher-margin concentrate sales
compared with finished product sales reflecting the shift from sales
of finished goods discussed above.
Restaurants - Aside from the effect of the RTM Sale, margins increased
to 51.4% from 45.4% primarily due to (i) the higher percentage of
royalties and franchise fees (with no associated cost of sales) to
total revenues in the 1997 period due to the RTM Sale discussed above
and (ii) the absence in the 1997 period of depreciation and
amortization on all long-lived restaurant assets which had been written
down to their estimated fair values as of December 31, 1996 and were no
longer depreciated or amortized through their May 5, 1997 date of sale.
Propane - Margins decreased to 20.5% from 22.7% due to the average
dollar margin per propane gallon remaining relatively unchanged while
the average sales price per gallon increased 6.3% due to passing on the
higher product costs to customers.
Textiles - Aside from the effect of the Textile Business sale, margins
for specialty dyes and chemicals decreased to 18.1% from 22.8% due to
the aforementioned pricing pressures.
Advertising, selling and distribution expenses increased $33.7 million to
$141.1 million in the nine months ended September 28, 1997 reflecting the
expenses of Snapple partially offset by (a) a decrease in the expenses of the
restaurant segment principally due to the cessation of local restaurant
advertising and marketing expenses resulting from the RTM Sale, (b) a decrease
in the expenses of the beverage segment exclusive of Snapple principally due to
(i) lower bottler promotional reimbursements resulting from the decline in sales
volume, (ii) the elimination of advertising expenses for Draft Cola and (iii)
planned reductions in connection with the aforementioned decrease in sales of
other Royal Crown and C&C branded finished products, all partially offset by
higher promotional costs related to Mistic Rain Forest Nectars, a recently
introduced product line, and other advertising for the premium beverages line
other than Snapple and (c) nonrecurring expenses of the 1996 period related to
the Textile Business sold in April 1996.
General and administrative expenses increased $12.8 million to $108.7
million in the nine months ended September 28, 1997 due to (i) the expenses of
Snapple, (ii) a nonrecurring credit in the 1996 period for the release of
casualty insurance reserves and (iii) other inflationary increases, all
partially offset by (i) expenses in the 1996 period related to the Textile
Business, (ii) reduced spending levels related to administrative support,
principally payroll, no longer required for the sold restaurants as a result of
the RTM Sale and (iii) reduced travel activity in the restaurant segment prior
to the RTM Sale.
The facilities relocation and corporate restructuring charge of $7.4
million in the nine months ended September 28, 1997 principally consists of
employee severance and related termination costs and employee relocation
associated with restructuring the restaurant segment in connection with the RTM
Sale and, to a lesser extent, costs associated with the relocation of the Fort
Lauderdale, Florida headquarters of Royal Crown, which has been centralized in
the White Plains, New York headquarters of Mistic Brands, Inc. ("Mistic"), a
wholly-owned subsidiary of the Company, and Snapple.
Acquisition related costs of $32.4 million in the nine months ended
September 28, 1997 associated with the acquisition of Snapple on May 22, 1997
consists of (i) a write-down of glass front vending machines based on the
Company's change in estimate of their value considering the Company's plans for
their future use, (ii) a provision for additional reserves for legal matters
based on the Company's change in estimate of the amounts required reflecting its
plans and estimates of costs to resolve such matters, (iii) a provision for
certain costs in connection with the successful consummation of the acquisition
of Snapple and the Mistic refinancing in connection with entering into the
Credit Agreement (see below under "Liquidity and Capital Resources"), (iv) a
provision for fees paid to Quaker pursuant to a transition services agreement
whereby Quaker provided certain operating and accounting services for Snapple
through the end of the Company's second quarter, (v) the portion of the
post-acquisition period promotional expenses the Company estimates is related to
the pre-acquisition period, (vi) a provision for costs, principally for
independent consultants, incurred in connection with the data processing
implementation of the accounting systems for Snapple (under Quaker, Snapple did
not have its own independent data processing accounting systems), including
costs incurred relating to an alternative system that was not implemented and
(vii) a provision for additional reserves for doubtful accounts based on the
Company's change in estimate of the related write-off to be incurred.
Interest expense decreased $2.8 million to $54.8 million in the nine months
ended September 28, 1997 due to lower average levels of debt reflecting (a) the
full period effect of 1996 repayments prior to maturity of (i) $191.4 million of
debt of the Textile Business in connection with its sale on April 29, 1996, (ii)
$34.7 million principal amount of a 9 1/2% promissory note (the "9 1/2% Note")
on July 1, 1996 and (iii) $36.0 million principal amount of the Company's 11
7/8% senior subordinated debentures due February 1, 1998 (the "11 7/8%
Debentures") on February 22, 1996 and (b) the 1997 assumption by RTM of an
aggregate $69.6 million of mortgage and equipment notes payable and capitalized
lease obligations in connection with the RTM Sale on May 5, 1997, all partially
offset by the effects of (a) borrowings by Snapple (see below under "Liquidity
and Capital Resources") in connection with the May 22, 1997 Snapple acquisition
($223.7 million outstanding as of September 28, 1997) and (b) higher average
levels of borrowings at C.H. Patrick & Co., Inc. ("C.H. Patrick"), a
wholly-owned subsidiary of the Company, under the Patrick Facility (see below
under "Liquidity and Capital Resources") entered into in May 1996 ($32.1 million
outstanding as of September 28, 1997).
Gain on sale of businesses, net of $0.3 million in the nine months ended
September 28, 1997 consists of (i) a gain from the receipt by Triarc of
distributions from National Propane Partners, L.P. (the "Partnership"), a
limited partnership 42.7% owned by National Propane Corporation ("National
Propane"), a wholly-owned subsidiary of the Company, which was formed to
acquire, own and operate the propane business (see further discussion below
under "Liquidity and Capital Resources") and (ii) a gain on the C&C Sale, both
recognized in the third quarter of 1997 and partially offset by a loss on the
RTM Sale recognized in the second quarter of 1997. Gain on sale of businesses,
net of $76.6 million in the nine months ended September 30, 1996 resulted from a
pre-tax gain resulting from the July 1996 sale of a 55.8% interest in the
Partnership (such percentage increased to 57.3% as a result of the sale of an
additional 0.4 million Common Units in November 1996) partially offset by (i) a
pre-tax loss on the sale of the Textile Business (the estimate of which was
recorded in the second quarter of 1996 with an adjustment in the third quarter
of 1996) and (ii) a pre-tax loss associated with the third quarter 1996
write-down of MetBev.
Investment income, net increased $6.4 million to $10.9 million in the nine
months ended September 28, 1997 reflecting (i) interest income on the Company's
increased portfolio of cash equivalents and short-term investments resulting
from the full period effect in the 1997 period of proceeds in connection with
(a) the sale of 57.3% of the Company's propane business in the second half of
1996 and (b) the sale of the Textile Business in April 1996 and (ii) an increase
in realized gains on the sales of short-term investments in the 1997 period
which may not recur in future periods.
Other income (expense), net increased $3.1 million to $3.6 million in the
nine months ended September 28, 1997 principally due to (i) a reversal of legal
fees incurred in prior years as a result of a cash settlement received from
Victor Posner ("Posner"), the former Chairman and Chief Executive Officer of the
Company, and an affiliate of Posner during the 1997 second quarter, (ii) a gain
on lease termination for a portion of the space no longer required in the Fort
Lauderdale facility due to staff reductions as a result of the RTM Sale and the
relocation of the Royal Crown headquarters, (iii) other income, net of Snapple
since its acquisition in May 1997 consisting principally of equity in the
earnings of affiliates and rental income, (iv) increased gains on other asset
sales and (v) other miscellaneous increases, all partially offset by a provision
for a settlement, subject to court approval, during the nine months ended
September 28, 1997 in connection with the Company's investment in a joint
venture with Prime Capital Corporation ("Prime") (see further discussion below
under "Liquidity and Capital Resources").
The benefit from and (provision for) income taxes represent annual
effective tax rates of 22% and 44% based on the estimated annual tax rates as of
September 28, 1997 and September 30, 1996, respectively. Such rate is lower in
the 1997 period due principally to the differing impact on the respective
effective rates of the amortization of nondeductible costs in excess of net
assets of acquired companies ("Goodwill") partially offset by minority interests
in the nontaxable income of the Partnership in a period with a pre-tax loss
(1997) compared with a period with pre-tax income (1996). The Goodwill
amortization and the minority interests had a reduced effect on the 1996
effective rate compared with the 35% statutory rate due to a significant pre-tax
gain on the sale of a 55.8% interest in the Partnership in July 1996.
The minority interests in net income and loss of a consolidated subsidiary
of $1.2 million and $1.8 million in the 1997 and 1996 periods, respectively,
represent the limited partners' 57.3% interests (principally sold in July 1996)
in the net income and loss, respectively, of the Partnership. The $3.0 million
change to a charge in the 1997 period reflects the seasonality of the
Partnership's business due to weather conditions and that impact in conjunction
with the timing of the sale of the limited partners' 57.3% interest.
The extraordinary charges in the 1997 period result from (i) the May 1997
assumption by RTM of mortgage and equipment notes payable in connection with the
RTM Sale and (ii) the refinancing of the bank facility of Mistic (see "Liquidity
and Capital Resources") and are comprised of the write-off of unamortized
deferred financing costs, net of the related income tax benefit. The
extraordinary charges in the 1996 period result from the early extinguishment of
almost all of the long-term debt of National Propane refinanced in connection
with the formation of the Partnership and the 9 1/2% Note in July 1996, all debt
of the Textile Business in April 1996 and the 11 7/8% Debentures in February
1996 and consist of (i) the write-off of unamortized deferred financing costs
and unamortized original issue discount, (ii) the payment of prepayment
penalties and related costs and (iii) the payment of fees partially offset by
(i) discount from principal on the early extinguishment of the 9 1/2% Note and
(ii) income tax benefit.
THREE MONTHS ENDED SEPTEMBER 28, 1997 COMPARED WITH THREE MONTHS ENDED
SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
REVENUES OPERATING PROFIT (LOSS)
THREE MONTHS ENDED THREE MONTHS ENDED
---------------------- --------------------------
SEPTEMBER SEPTEMBER, SEPTEMBER SEPTEMBER
30, 1996 28, 1997 30, 1996 28, 1997
-------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Beverages...................................................$ 87,278 $ 211,320 $ 9,697 $ 21,354
Restaurants................................................. 73,489 17,942 4,142 9,345
Propane .................................................... 27,720 29,300 (2,464) (1,684)
Textiles.................................................... 17,960 16,439 2,720 1,662
Unallocated general corporate expenses...................... -- -- (2,710) (5,200)
---------- ---------- --------- ----------
$ 206,447 $ 275,001 $ 11,385 $ 25,477
=========== ========== ========= =========
</TABLE>
Revenues increased $68.6 million to $275.0 million in the three months
ended September 28, 1997 principally reflecting the sales in the three months
ended September 28, 1997 associated with Snapple which was acquired by the
Company on May 22, 1997 (see further discussion below under "Liquidity and
Capital Resources") partially offset by nonrecurring third quarter 1996 sales of
the restaurant segment resulting from the RTM Sale on May 5, 1997. Aside from
the effects of these transactions, revenues decreased $14.4 million. A
discussion of such change in revenues by segment is as follows:
Beverages - Aside from the effect of the Snapple acquisition in
the 1997 period, revenues decreased $17.5 million (20.1%) due to
decreases in sales of finished goods ($12.6 million) and
concentrate ($4.9 million). The decrease in sales of finished
goods principally reflects (i) lower sales of premium beverages
exclusive of Snapple, (ii) the absence in the 1997 third quarter
of 1996 sales to MetBev, (iii) a volume decrease in sales of C&C
beverages principally due to the C&C Sale in July 1997 and (iv) a
volume decrease in sales of other Royal Crown branded finished
products in areas other than those serviced by MetBev. The
decrease in concentrate sales reflects a volume decline in branded
sales which were adversely affected by soft bottler case sales and
a volume decrease in private label sales.
Restaurants - After the sale of all company-owned restaurants in
the RTM Sale, restaurant revenues consist entirely of royalties
and franchise fees which increased $3.0 million (20.4%) due to
(i) incremental royalties from the restaurants sold to RTM,
(ii) an average net increase of 59 (2.3%) franchised restaurants
other than from the RTM Sale and (iii) a 0.7% increase in same-
store sales of franchised restaurants.
Propane - Revenues increased $1.6 million (5.7%) due to (i) the
effect of higher volume resulting from acquisitions of propane
distributorships and the opening of new service centers, as well
as increased sales at existing service centers and (ii) an
increase in revenues from other product lines, both offset by the
effect of lower average selling prices.
Textiles (specialty dyes and chemicals) - Revenues decreased $1.5
million (8.5%), reflecting price competition pressures and a
cyclical downturn in the denim segment of the textile industry in
which the Company's dyes are used.
Gross profit increased $49.8 million to $127.6 million in the three months
ended September 28, 1997 principally reflecting the third quarter 1997 gross
profit from Snapple partially offset by the nonrecurring third quarter 1996
gross profit associated with the company-owned Arby's restaurants sold to RTM.
Aside from the effect of these transactions, gross profit decreased $2.1 million
due to the lower revenues discussed above. A discussion of changes in gross
margins by segment, which increased in the aggregate to 49.5% from 46.1% aside
from the effects of the transactions noted above, is as follows:
Beverages - Aside from the effect of the Snapple acquisition in
the 1997 quarter, margins increased to 58.5% from 53.1%
principally due to (i) the recognition in the 1997 period of a
guarantee to the Company of certain minimum gross profit levels on
sales to the Company's private label customer, recorded as a
reduction to cost of sales, for which no similar amount was
recognized in the 1996 comparable quarter and (ii) the shift in
product mix to higher-margin concentrate sales compared with
finished product sales reflecting the shift from sales of finished
goods as described in the nine-month discussion.
Restaurants - After the sale of all company-owned Arby's
restaurants in the RTM Sale, margins are 100.0% due to the fact
that royalties and franchise fees (with no associated cost of
sales) now constitute all revenues.
Propane - Margins increased to 14.7% from 10.4% principally due to
the fact that the average dollar margin per gallon increased 0.4%,
while the average sales price per gallon decreased 2.2% due to
lower product costs.
Textiles - Margins for specialty dyes and chemicals decreased to
18.3% from 22.7% due to the aforementioned pricing pressures.
Advertising, selling and distribution expenses increased $25.0 million to
$60.3 million in the three months ended September 28, 1997 reflecting the
expenses of Snapple partially offset by (a) a decrease in the expenses of the
restaurant segment principally due to the cessation of local restaurant
advertising and marketing expenses resulting from the RTM Sale and (b) a
decrease in the expenses of the beverage segment exclusive of Snapple
principally due to (i) lower bottler promotional reimbursements resulting from
the decline in sales volume, (ii) planned reductions in connection with the
aforementioned decrease in sales of other Royal Crown and C&C branded finished
products and (iii) the elimination of advertising expenses for Draft Cola.
General and administrative expenses increased $10.7 million to $41.9
million in the three months ended September 28, 1997 due to (i) the expenses of
Snapple and (ii) other inflationary increases, both partially offset by reduced
spending levels related to administrative support, principally payroll, no
longer required for the sold restaurants.
Interest expense increased $4.3 million to $20.8 million in the three
months ended September 28, 1997 due to higher average levels of debt reflecting
the aforementioned borrowings by Snapple partially offset by the assumption by
RTM of an aggregate $69.6 million of mortgage and equipment notes payable and
capitalized lease obligations in connection with the RTM Sale on May 5, 1997.
Gain on sale of businesses, net of $2.6 million in the three months ended
September 28, 1997 consists of a gain from distributions received from the
Partnership and a gain on the C&C Sale, both as described above in the
nine-month discussion. Gain on sales of businesses, net of $77.1 million in the
three months ended September 30, 1996 resulted from a pre-tax gain resulting
from the July 1996 sale of a 55.8% interest in the Partnership partially offset
by (i) an adjustment to the pre-tax loss on the sale of the Textile Business
recorded in the second quarter of 1996 and (ii) a pre-tax loss associated with
the write-down of MetBev.
Investment income, net increased $4.0 million to $6.4 million in the three
months ended September 28, 1997 reflecting an increase in realized gains on the
sales of short-term investments in the 1997 quarter.
Other income (expense), net amounted to expense of $1.2 million in the
three months ended September 28, 1997 compared with income of $0.2 million in
the comparable 1996 quarter principally due to a provision for a settlement,
subject to court approval, during the three months ended September 28, 1997 in
connection with the Company's investment in a joint venture with Prime partially
offset by other income, net of Snapple since its acquisition in May 1997
consisting principally of equity in the earnings of affiliates and rental
income.
The provisions for income taxes for the three-month periods ended September
28, 1997 and September 30, 1996 represent effective tax rates of 28% and 39%,
respectively. Such rate in the 1997 quarter was based on a projected pre-tax
loss for the year ending December 31, 1997 compared with projected pre-tax
income for the year ending December 31, 1996 and is lower due to the differing
impact on the respective effective rates of Goodwill amortization partially
offset by substantially nontaxable minority interests in a quarter with a full
year projected pre-tax loss (1997) compared with a quarter with full year
projected pre-tax income (1996). The Goodwill amortization and the minority
interests had a reduced effect on the 1996 effective rate compared with the 35%
statutory rate due to the significant $83.4 million pre-tax gain on the sale of
a 55.8% interest in the Partnership in July 1996.
The minority interests in loss of consolidated subsidiary increased $0.1
million to $1.9 million in the 1997 quarter resulting from an increase in the
loss of the Partnership in the 1997 quarter before an extraordinary charge which
was allocated in its entirety to the Company.
The extraordinary items aggregating a gain of $3.1 million in the 1996
period result from the early extinguishment of almost all of the long-term debt
of National Propane and the 9 1/2% Note in July 1996 and consist of the discount
from principal on the early extinguishment of the 9 1/2% Note less (i) the
write-off of unamortized deferred financing costs, (ii) the payment of
prepayment penalties, (iii) the payment of fees and (iv) income taxes.
LIQUIDITY AND CAPITAL RESOURCES
Aggregate cash and cash equivalents (collectively "cash") and short-term
investments decreased $79.7 million during the nine months ended September 28,
1997 to $126.4 million reflecting a decrease in cash of $85.3 million to $69.1
million. Such decrease in cash primarily reflects cash used by investing
activities of $336.8 million partially offset by cash provided by (i) financing
activities of $207.7 million, (ii) operating activities of $43.2 million and
(iii) discontinued operations of $0.6 million. The net cash used in investing
activities reflects (i) $321.1 million for the acquisition (the "Acquisition")
of Snapple (see below), (ii) other business acquisitions of $7.6 million, (iii)
capital expenditures of $10.9 million and (iv) net purchases of short-term
investments of $1.1 million, partially offset by $3.9 million of proceeds from
sales of properties and other changes. The net cash provided by financing
activities reflects (i) proceeds of $335.1 million from issuances of long-term
debt including $330.0 million of borrowings principally used to finance the
Acquisition and to refinance the debt of Mistic under a new $380.0 million
credit agreement (see below) and (ii) other of $1.7 million partially offset by
(i) long-term debt repayments of $107.3 million, including $70.9 million of
Mistic debt refinanced, (ii) payment of deferred financing costs of $11.3
million, including $11.2 million in connection with the new $380.0 million
credit agreement and (iii) $10.5 million of distributions paid on the common
units (see below) in the Partnership. The net cash provided by operating
activities principally reflects, (i) non-cash charges of $60.0 million
principally for depreciation and amortization of $33.0 million and provision for
acquisition related costs net of payments of $29.2 million and (ii) cash
provided by changes in operating assets and liabilities of $7.6 million,
partially offset by the net loss of $24.4 million. The cash provided by changes
in operating assets and liabilities of $7.6 million principally reflects (i) a
decrease in receivables of $4.1 million, (ii) a decrease in prepaid expenses and
other current assets of $7.7 million principally associated with the related
timing of payments, prepaid rent no longer applicable as a result of the RTM
Sale and the release of restricted cash and (iii) an increase in accounts
payable and accrued expenses of $4.3 million, partially offset by an increase in
inventories of $8.5 million reflecting lower than anticipated sales in premium
beverages other than Snapple and inventories associated with an expanded Snapple
product line. The Company expects continued positive cash flows from operations
for the remainder of 1997.
Working capital (current assets less current liabilities) was $126.6
million at September 28, 1997, reflecting a current ratio (current assets
divided by current liabilities) of 1.5:1. Such amount represents a decrease in
working capital of $68.6 million from December 31, 1996 principally reflecting
(i) the $79.7 million decrease in cash and short-term investments discussed
above, (ii) a $25.9 million net decrease in working capital associated with the
provision for acquisition related costs, net of payments, and (iii) the $7.6
million net decrease in working capital from changes in operating assets and
liabilities as described above, all partially offset by $41.4 million of working
capital of Snapple at its acquisition date. The effect on working capital of the
$71.1 million decrease in "Assets held for sale" was substantially offset by
$69.6 million of the decrease in current portion of long-term debt resulting
from the RTM Sale described below.
On May 5, 1997 certain of the principal subsidiaries comprising the
Company's restaurant segment sold to RTM all of the 355 company-owned Arby's
restaurants. The sales price consisted of cash and a promissory note (discounted
value) aggregating $1.4 million and the assumption by RTM of mortgage and
equipment notes payable to FFCA Mortgage Corporation ("FFCA") of $54.7 million
(the "FFCA Borrowings") and capitalized lease obligations of $14.9 million. RTM
now operates the 355 restaurants as a franchisee and pays royalties to the
Company at a rate of 4% of those restaurants' net sales.
As a result of the RTM Sale, the Company's remaining restaurant operations
are exclusively franchising. The restaurant segment, without the operation of
the company-owned restaurants, has begun to experience and will continue to
benefit from improved cash flow as a result of (i) substantially reduced capital
expenditures, (ii) higher royalty fees as a result of the aforementioned
royalties relating to the restaurants sold to RTM and (iii) the reduction of
operating costs, a process begun in the second quarter and whose full period
effect should be effectuated in the fourth quarter.
On July 18, 1997, the Company completed the C&C Sale consisting of its
rights to the C&C beverage line of mixers, colas and flavors, including the C&C
trademark and equipment related to the operation of the C&C beverage line, to
Kelco Sales & Marketing Inc., for consideration of $0.8 million in cash and an
$8.6 million note (the "Kelco Note") with a discounted value of $6.0 million
consisting of $3.6 million relating to the C&C Sale and $2.4 million relating to
future revenues for services to be performed over seven years. The Kelco Note is
due in monthly installments of varying amounts of approximately $0.1 million
through August 2004.
On May 22, 1997 Triarc acquired Snapple, a producer and seller of premium
beverages, from Quaker for $321.1 million including cash of $308.0 million
(including $8.0 million of post-closing adjustments and subject to additional
post-closing adjustments), $10.3 million of estimated fees and expenses and $2.8
million of deferred purchase price. The purchase price for the Acquisition was
funded from (i) $75.0 million of cash and cash equivalents on hand and
contributed by Triarc to Triarc Beverage Holdings Corp. ("TBHC"), a wholly-owned
subsidiary of the Company and the parent of Snapple and Mistic, and (ii) $250.0
million of borrowings by Snapple on May 22, 1997 under a $380.0 million credit
agreement, as amended (the "Credit Agreement"), entered into by Snapple, Mistic
and TBHC (collectively, the "Borrowers").
The Credit Agreement consists of (i) $300.0 million of term loans (the
"Term Loans") of which $225.0 million and $75.0 million were borrowed by Snapple
and Mistic, respectively, at the Acquisition date ($223.7 million and $74.6
million, respectively, outstanding at September 28, 1997) and (ii) a revolving
credit line (the "Revolving Credit Line") which provides for up to $80.0 million
of revolving credit loans (the "Revolving Loans") by Snapple, Mistic or TBHC of
which $25.0 million and $5.0 million were borrowed on the Acquisition date by
Snapple and Mistic, respectively. No Revolving Loans were outstanding at
September 28, 1997. The aggregate $250.0 million borrowed by Snapple was
principally used to fund a portion of the purchase price for Snapple. The
aggregate $80.0 million borrowed by Mistic was principally used to repay all of
the $70.9 million then outstanding borrowings under Mistic's former bank credit
facility plus accrued interest thereon. The borrowing base for Revolving Loans
is the sum of 80% of eligible accounts receivable and 50% of eligible inventory.
The Term Loans are due $1.8 million during the remainder of 1997, $9.5 million
in 1998, $14.5 million in 1999, $19.5 million in 2000, $24.5 million in 2001,
$27.0 million in 2002, $61.0 million in 2003, $94.0 million in 2004 and $46.5
million in 2005 and any Revolving Loans would be due in full in June 2003. The
Borrowers must also make mandatory prepayments in an amount equal to 75% of
excess cash flow, as defined. The Credit Agreement contains various covenants
which, among other matters, require meeting certain financial amount and ratio
tests and prohibit dividends. Substantially all of the assets of Snapple and
Mistic and the common stock of Snapple, Mistic and TBHC are pledged as security
for obligations under the Credit Agreement.
Under the Company's various credit arrangements (which are described in
detail above and in Note 13 to the consolidated financial statements contained
in the Form 10-K), the Company has availability as of September 28, 1997 as
follows: $46.1 million available under the $80.0 million Revolving Credit Line
described above in accordance with such agreement's borrowing base, $6.5 million
available under the $15.0 million (temporarily reduced to $7.0 million until
certain levels of profitability are achieved) revolving credit portion of a
$50.0 million revolving credit and term loan facility (the "Patrick Facility")
maintained by C.H. Patrick and $15.0 million available for working capital and
general business purposes of the propane business under a $55.0 million bank
credit facility (the "Propane Bank Credit Facility") maintained by National
Propane, L.P. (the "Operating Partnership"), a subpartnership of the
Partnership, exclusive of $28.0 million available for business acquisitions and
capital expenditures for growth.
Under the Company's various debt agreements, substantially all of Triarc's
and its subsidiaries' assets other than cash and short-term investments are
pledged as security. In addition, obligations under (i) the $275.0 million
aggregate principal amount of 9 3/4% senior secured notes due 2000 (the "Senior
Notes") of RC/Arby's Corporation ("RCAC"), a wholly-owned subsidiary of Triarc,
have been guaranteed by RCAC's wholly-owned subsidiaries, Royal Crown and
Arby's, Inc. ("Arby's"), (ii) the $125.0 million of 8.54% first mortgage notes
due June 30, 2010 of the Partnership and the Propane Bank Credit Facility have
been guaranteed by National Propane, a general partner of the Partnership and
(iii) the Patrick Facility and the FFCA Borrowings including (a) those assumed
by RTM and (b) $3.5 million of debt retained by a subsidiary of RCAC following
the sale of restaurants to RTM, have been guaranteed by Triarc. As collateral
for such guarantees, all of the stock of Royal Crown, Arby's, and C.H. Patrick
is pledged as well as approximately 2% of the Unsubordinated General Partners'
Interest (see below). Although Triarc has not guaranteed the obligations under
the Credit Agreement, all of the stock of Snapple, Mistic and TBHC is pledged as
security for payment of such obligations. Although the stock of National Propane
is not pledged in connection with any guarantee of debt obligations, it is
pledged in connection with the Partnership Loan (see below).
As of September 28, 1997 the Partnership is owned 57.3% by outside
investors who hold 6.7 million of its common units representing limited partner
interests (the "Common Units") and 42.7% by National Propane who holds 4.5
million subordinated units (the "Subordinated Units") and, together with a
subsidiary, a combined aggregate 4.0% unsubordinated general partners' interest
(the "Unsubordinated General Partners' Interest") in the Partnership and the
Operating Partnership. As of September 28, 1997, the Partnership's principal
cash requirements for the remainder of 1997 consist of quarterly distributions
(see below) to be paid on the Common Units of $3.5 million, distributions to be
paid on the Subordinated Units and the Unsubordinated General Partners' Interest
of $2.6 million, capital expenditures of approximately $1.7 million (consisting
of $0.9 million for growth and $0.8 million for maintenance) and funding for
acquisitions, if any. The Partnership expects to meet such requirements through
a combination of cash flows from operations, including interest income on the
Partnership Loan (see below), cash and cash equivalents on hand ($2.1 million as
of September 28, 1997), and availability under the Propane Bank Credit Facility.
The Partnership must make quarterly distributions of its cash balances in excess
of reserve requirements, as defined, to holders of the Common Units, the
Subordinated Units and the Unsubordinated General Partners' Interest within 45
days after the end of each fiscal quarter. Accordingly, positive cash flows will
generally be used to make such distributions. On October 27, 1997 the
Partnership announced it would pay a quarterly distribution for its quarter
ended September 30, 1997 of $0.525 per Common and Subordinated Unit to
unitholders of record on November 6, 1997 with a proportionate amount for the
Unsubordinated General Partners' Interest, or an aggregate of $6.1 million,
including $2.6 million payable to National Propane related to the Subordinated
Units and the Unsubordinated General Partners' Interest.
The Company's debt instruments require aggregate principal payments of $3.0
million during the remainder of 1997. Such repayments consist of $1.8 million
and $0.7 million of repayments under the Term Loans and the Patrick Facility,
respectively, and $0.5 million of other debt repayments.
Consolidated capital expenditures amounted to $11.0 million for the nine
months ended September 28, 1997. The Company expects that capital expenditures
during the remainder of 1997, exclusive of those of the propane segment, will
approximate $2.0 million. In addition, as set forth above, capital expenditures
for the remainder of 1997 for the propane segment are anticipated to be $1.7
million, including those associated with the propane segment. As of September
28, 1997 there were approximately $1.4 million of outstanding commitments for
such capital expenditures. In accordance with the indenture pursuant to which
the Senior Notes were issued (the "Senior Note Indenture"), RCAC was required to
reinvest $2.1 million in core business assets during October 1997 as a result of
the RTM Sale and certain other asset disposals, and completed such reinvestment
in core business assets other than properties and equipment. Also in accordance
with the Senior Note Indenture, RCAC is required to reinvest up to an additional
$4.4 million through January 1998 in connection with the C&C Sale through
capital expenditures (including up to $0.2 million of those planned above)
and/or business or other core asset acquisitions.
In furtherance of the Company's growth strategy, the Company considers
selective business acquisitions, as appropriate, to grow strategically and
explore other alternatives to the extent it has available resources to do so.
During the nine months ended September 28, 1997 the Company acquired Snapple for
$321.1 million, as described above, and five propane distributors for $8.3
million including cash of $7.6 million. Further, on June 24, 1997 the Company
entered into a definitive merger agreement (the "Merger Agreement") with Cable
Car Beverage Corporation ("Cable Car"), a distributor of beverages, principally
Stewart's brand soft drinks, whereby Triarc will issue shares of its Class A
common stock for all of the outstanding stock of Cable Car at a ratio of 0.1722
Triarc shares for each outstanding common share of Cable Car, subject to
downward or upward adjustment if the average market price of Triarc common stock
exceeds $24 1/2 or is less than $18 7/8, respectively, for the fifteen trading
days prior to the closing. The preliminary estimated cost of the acquisition is
$41.6 million consisting of (i) the assumed value of $38.1 million of
approximately 1.6 million Triarc common shares to be issued based on the closing
market price on November 5, 1997 of $24 5/16 for Triarc common stock (the
"November 5, 1997 Market Price"), (ii) the assumed value of $2.9 million (based
upon the November 5, 1997 Market Price) of 155,411 options to purchase an equal
number of shares of Triarc common stock with below market option prices to be
issued in exchange for all of the outstanding Cable Car stock options (as of the
assumed issuance date of November 5, 1997) and (iii) an estimated $0.650 million
of costs to be incurred related to the acquisition (excluding $0.650 million
attributable to the issuance of the Triarc common shares to be exchanged which
will be charged to "Additional paid-in capital"). The acquisition is currently
expected to close by the end of November 1997 and is subject to the approval of
Cable Car's shareholders who are scheduled to vote on a proposal to approve the
Merger Agreement on November 25, 1997.
The Federal income tax returns of the Company have been examined by the
Internal Revenue Service (the "IRS") for the tax years 1989 through 1992 and the
IRS had issued notices of proposed adjustments prior to 1997 increasing taxable
income by approximately $145.0 million. Triarc has resolved approximately $102.0
million of such proposed adjustments and in connection therewith, the Company
has paid $5.3 million, including interest, thus far in November 1997 and expects
to pay later in November 1997 an additional amount of approximately $8.5
million, including interest, which aggregate amounts have been fully reserved in
prior years. The Company intends to contest the unresolved adjustments of
approximately $43.0 million, the tax effect of which has not yet been
determined, at the appellate division of the IRS and accordingly, the amount of
any payments required as a result thereof cannot presently be determined.
Under a program announced in October 1997, management of the Company has
been authorized, when and if market conditions warrant, to repurchase until
October 1998, up to $20.0 million of its Class A common stock. Purchases under
the program will not commence until after the consummation of the Cable Car
acquisition, which is subject to, the approval of Cable Car's shareholders and
is expected to close by the end of November 1997. There can, however, be no
assurance that any such purchases will be made.
As of September 28, 1997, the Company's cash requirements, exclusive of
those of the propane segment and of operating cash flow requirements, for the
remainder of 1997 consist principally of (i) the previously discussed aggregate
Federal income tax payments of approximately $13.8 million resulting from the
IRS examination of the Company's 1989 through 1992 income tax returns and
additional payments, if any, related to the $43.0 million of proposed
adjustments from such examination being contested, (ii) a $3.55 million payment
related to the proposed settlement of the Prime matter (discussed below under
"Legal and Environmental Matters"), (iii) debt principal payments currently
aggregating $3.0 million, (iv) capital expenditures of approximately $2.0
million, (v) amounts required reinvested in core business assets under the
Senior Note Indenture in October 1997 consisting of $2.1 million and any portion
of the $4.4 million required through January 1998 made in 1997 and (vi) the $1.3
million of costs associated with the acquisition of Cable Car and the cost of
additional acquisitions, if any. In addition, cash requirements on a
consolidated basis with respect to the propane segment for the remainder of 1997
consist principally of (i) quarterly distributions by the Partnership to holders
of the Common Units estimated to be $3.5 million (see above), (ii) capital
expenditures of $1.7 million and (iii) funding for acquisitions, if any. The
Company anticipates meeting all of such requirements through cash flows from
operations, existing cash and cash equivalents and short-term investments
($126.4 million as of September 28, 1997), and availability under the Propane
Bank Credit Facility, the Patrick Facility and the Revolving Credit Line.
In October 1996 the Company had announced that its Board of Directors
approved a plan to offer up to approximately 20% of the shares of its beverage
and restaurant businesses (then operated through Mistic and RCAC) to the public
through an initial public offering and to spin off the remainder of the shares
of such businesses to Triarc stockholders (collectively, the "Spinoff
Transactions"). In May 1997 the Company announced that it would not proceed with
the Spinoff Transactions as a result of the Acquisition and other complex
issues.
TRIARC
Triarc is a holding company whose ability to meet its cash requirements is
primarily dependent upon its (i) cash on hand and short-term investments ($91.2
million as of September 28, 1997), (ii) investment income on its cash
equivalents and short-term investments and (iii) cash flows from its
subsidiaries including loans, distributions and dividends (see limitations
below) and reimbursement by certain subsidiaries to Triarc in connection with
the (a) providing of certain management services and (b) payments under certain
tax-sharing agreements.
Triarc's principal subsidiaries, other than CFC Holdings Corp. ("CFC
Holdings"), the parent of RCAC, and National Propane, are unable to pay any
dividends or make any loans or advances to Triarc during the remainder of 1997
under the terms of the various indentures and credit arrangements. While there
are no restrictions applicable to National Propane, National Propane is
dependent upon cash flows from the Partnership to pay dividends. Such cash flows
are principally quarterly distributions (currently $10.5 million per year) from
the Partnership on the Subordinated Units and the Unsubordinated General
Partners' Interest (see above). While there are no restrictions applicable to
CFC Holdings, CFC Holdings would be dependent upon cash flows from RCAC to pay
dividends and, as of September 28, 1997, RCAC was unable to make any loans or
advances or pay any dividends to CFC Holdings.
Triarc's indebtedness to subsidiaries aggregated $74.6 million as of
September 28, 1997. Such indebtedness consists of a loan payable to the
Partnership of $40.7 million ("the Partnership Loan"), a $30.0 million demand
note payable to National Propane bearing interest at 13 1/2% payable in cash
(the "$30 Million Note"), a $2.0 million demand note to a subsidiary of RCAC and
a $1.9 million note due to Chesapeake Insurance Company Limited ("Chesapeake
Insurance"), a wholly-owned subsidiary of the Company. The Partnership Loan
bears interest at 13 1/2% and is due in equal annual amounts of approximately
$5.1 million commencing 2003 through 2010. While the $30 Million Note requires
the payment of interest in cash, Triarc currently expects to receive advances
from National Propane equal to such cash interest. Triarc must pay $0.125
million on the note due to Chesapeake Insurance during the remainder of 1997;
Triarc's other intercompany indebtedness requires no principal payments during
the remainder of 1997, assuming no demand is made under the $30 Million Note,
and none is anticipated, or the $2.0 million note payable to a subsidiary of
RCAC.
Triarc's principal cash requirements for the remainder of 1997 are (i)
general corporate expenses payments, (ii) its approximate $8.4 million portion
of the approximate $13.8 million of November Federal income tax payments
resulting from the IRS examination of the Company's 1989 through 1992 income tax
returns and additional payments, if any, related to the portion of proposed
adjustments from such examinations being contested, and (iii) interest due on
the Partnership Loan. Triarc expects to experience negative cash flows from
operations for its general corporate expenses for the remainder of 1997 since
its general corporate expenses will exceed reimbursements by subsidiaries for
management services provided, its investment income and distributions from the
Partnership. However, considering its cash and cash equivalents and short-term
investments, Triarc will be able to meet all of its cash requirements discussed
above for the remainder of 1997.
RCAC
RCAC's cash requirements for the remainder of 1997 exclusive of operating
cash flows (which include an income tax payment of its $4.6 million portion of
the approximate $13.8 million of Federal income tax payments) consist
principally of (i) the core asset reinvestment of $2.1 million required under
the Senior Note Indenture made during October 1997 and any portion of the $4.4
million required through January 1998 made in 1997, (ii) debt principal
repayments of $0.8 million, including intercompany debt and (iii) business
acquisitions, if any. RCAC anticipates meeting such requirements through
existing cash ($13.6 million as of September 28, 1997) and/or cash flows from
operations.
TBHC
As of September 28, 1997, the principal cash requirements of TBHC's
subsidiaries, Mistic and Snapple, for the remainder of 1997, exclusive of
operating cash flows, consist principally of $1.8 million of term loan payments
and $1.1 million of capital expenditures. Mistic and Snapple anticipate meeting
such requirements through cash flows from operations. Should Mistic or Snapple
need to supplement their cash flows, they have availability under the Revolving
Credit Line of $46.1 million.
C.H. PATRICK
As of September 28, 1997, C.H. Patrick's principal cash requirements for
the remainder of 1997 consist primarily of principal payments under the term
loan portion of the Patrick Facility of $0.7 million and capital expenditures of
$0.7 million. C.H. Patrick anticipates meeting such requirements through cash
flows from operations. Should C.H. Patrick need to supplement its cash flows, it
has availability under the revolving credit portion of the Patrick Facility of
$6.5 million.
THE PARTNERSHIP
A discussion of the Partnership's principal cash requirements for the
remainder of 1997 and its resources to meet such requirements is set forth
above.
The Partnership is subject to various federal, state and local laws and
regulations governing the transportation, storage and distribution of propane,
and the health and safety of workers, primarily regulations promulgated by the
Occupational Safety and Health Administration. On August 18, 1997, the U.S.
Department of Transportation (the "DOT") published its Final Rule for Continued
Operation of the Present Propane Trucks (the "Final Rule"). The Final Rule is
intended to address perceived risks during the transfer of propane. The Final
Rule required certain immediate changes in the Partnership's operating
procedures including retrofitting the Partnership's cargo tanks. The
Partnership, as well as the National Propane Gas Association and the propane
industry in general, believe that the Final Rule cannot practicably be complied
with in its current form. Accordingly, on October 15, 1997, the Partnership
joined four other multi-state propane marketers in filing an action against the
DOT in the United States District Court for the Western District of Missouri
seeking to enjoin enforcement of the Final Rule. At this time, the Company
cannot determine the likely outcome of the litigation or what the ultimate
long-term cost of compliance with the Final Rule will be. However, should the
Company be required to incur any costs related to this matter, the net charge to
operations would be limited to 43% of any such charge representing its ownership
in the Partnership (since November 1996).
LEGAL AND ENVIRONMENTAL MATTERS
In July 1993 APL Corporation ("APL"), which was affiliated with the Company
until an April 1993 change in control, became a debtor in a proceeding under
Chapter 11 of the Federal Bankruptcy Code. In February 1994 the official
committee of unsecured creditors of APL filed a complaint (the "APL Litigation")
against the Company and certain companies formerly or presently affiliated with
Posner or with the Company, alleging causes of action arising from various
transactions allegedly caused by the named former affiliates. The complaint
asserted various claims and sought an undetermined amount of damages from the
Company, as well as certain other relief. In June 1997 Triarc entered into a
settlement agreement with Posner and two affiliated entities (including APL)
pursuant to which, among other things, (i) Posner and an affiliate paid $2.5
million to the Company and (ii) the APL Litigation was dismissed.
Prior to the sale of the Textile Business (see above) TXL Corp. ("TXL"), a
wholly-owned subsidiary of the Company and the former operator of the Textile
Business, was involved in two environmental matters. In connection with the sale
of the Textile Business, the Company agreed to indemnify the purchaser for
certain costs, if any, in connection with those costs that are in excess of the
reserves at the time of sale, subject to certain limitations. In one of the
matters, contamination was discovered in a pond near Graniteville, South
Carolina and the South Carolina Department of Health and Control ("DHEC")
asserted that TXL may be one of the parties responsible for such contamination.
In connection therewith, no actions were required other than continued
monitoring of sediments in the pond. In the other matter, TXL owned a property
that in prior years was used as a landfill and operated jointly by TXL and the
county government that may have received municipal waste and possibly industrial
waste from TXL as well as sources other than TXL. As a result of actions by the
United States Environmental Protection Agency and DHEC, TXL proposed to conduct
a study of the landfill, the cost of which was estimated to be not more than
$150.0 thousand. Such study had not been approved and, accordingly, had not
commenced as of the date of the sale of the Textile Business and the Company has
not been advised of any such actions by the purchaser of the Textile Business.
With respect to both of these matters, the Company has not been informed by the
purchaser of any costs subject to reimbursement.
As a result of certain environmental audits in 1991, Southeastern Public
Service Company ("SEPSCO"), a wholly-owned subsidiary of the Company, 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. In addition, 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 some instances of certain contaminated soils. Remediation is required
at thirteen sites which were sold to or leased by the purchaser of the ice
operations. Remediation has been completed on ten of these sites and is ongoing
at three others. Such remediation is being made in conjunction with the
purchaser who has satisfied its obligation to pay up to $1.0 million of such
remediation costs. Remediation is also required at seven cold storage sites
which were sold to the purchaser of the cold storage operations. Remediation has
been completed at one site and is ongoing at four other sites. Remediation is
expected to commence on the remaining two sites in 1998 and 1999. Such
remediation is being made in conjunction with the purchaser who is responsible
for the first $1.25 million 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
operations. Of these, eleven have been remediated through September 28, 1997 at
an aggregate cost of $1.0 million. In addition, SEPSCO is aware of one plant
which may require demolition in the future.
In May 1994 National (the entity representative of both the operations of
National Propane and the Partnership) was informed of coal tar contamination
which was discovered at one of its properties in Wisconsin. National purchased
the property from a company (the "Successor") which had purchased the assets of
a utility which had previously owned the property. National believes that the
contamination occurred during the use of the property as a coal gasification
plant by such utility. In order to assess the extent of the problem, National
engaged environmental consultants in 1994. As of November 1, 1997, National's
environmental consultants have begun but not completed their testing. Based upon
information compiled to date which is not yet complete, it appears the likely
remedy will involve treatment of groundwater and treatment of the soil,
installation of a soil cap and, if necessary, excavation, treatment and disposal
of contaminated soil. As a result, the environmental consultants' current range
of estimated costs for remediation is from $0.8 million to $1.6 million.
National will have to agree upon the final plan with the state of Wisconsin.
Since receiving notice of the contamination, National has engaged in discussions
of a general nature concerning remediation with the state of Wisconsin. These
discussions are ongoing and there is no indication as yet of the time frame for
a decision by the state of Wisconsin or the method of remediation. Accordingly,
the precise remediation method to be used is unknown. Based on the preliminary
results of the ongoing investigation, there is a potential that the contaminants
may extend to locations downgradient from the original site. If it is ultimately
confirmed that the contaminant plume extends under such properties and if such
plume is attributable to contaminants emanating from the Wisconsin property,
there is the potential for future third-party claims. National is also engaged
in ongoing discussions of a general nature with the Successor. The Successor has
denied any liability for the costs of remediation of the Wisconsin property or
of satisfying any related claims. However, National, if found liable for any of
such costs, would still attempt to recover such costs from the Successor.
National has notified its insurance carriers of the contamination, the likely
incurrence of costs to undertake remediation and the possibility of related
claims. Pursuant to a lease related to the Wisconsin facility, the Partnership
has agreed to be liable for any costs of remediation in excess of amounts
recovered from the Successor or from insurance. However, should the Company be
required to incur any costs related to this matter above those already accrued
for, the net charge to operations would be limited to 43% representing its
ownership interest in the Partnership (since November 1996). Since the
remediation method to be used is unknown, no amount within the cost ranges
provided by the environmental consultants can be determined to be a better
estimate.
In 1993 Royal Crown became aware of possible contamination from
hydrocarbons in groundwater at two abandoned bottling facilities. Tests have
confirmed hydrocarbons in the groundwater at both of the sites and remediation
has commenced. Management estimates that total remediation costs will be
approximately $0.9 million, with approximately $275 thousand to $310 thousand
expected to be reimbursed by the State of Texas Petroleum Storage Tank
Remediation Fund at one of the two sites, of which $0.7 million has been
expended to date.
In 1994 Chesapeake Insurance and SEPSCO invested approximately $5.1 million
in a joint venture with Prime. Subsequently in 1994, SEPSCO and Chesapeake
Insurance terminated their investments in such joint venture. In March 1995
three creditors of Prime filed an involuntary bankruptcy petition under the
Federal bankruptcy code against Prime. In November 1996 the bankruptcy trustee
appointed in the Prime bankruptcy case made a demand on Chesapeake Insurance and
SEPSCO for return of the approximate $5.3 million. In January 1997 the
bankruptcy trustee commenced adversary proceedings against Chesapeake Insurance
and SEPSCO seeking the return of the approximate $5.3 million allegedly received
by Chesapeake Insurance and SEPSCO during 1994 and alleging such payments from
Prime were preferential or constituted fraudulent transfers. In October 1997 the
parties agreed to a settlement of the actions, subject to the bankruptcy court's
approval, whereby SEPSCO and Chesapeake Insurance would collectively return
$3.55 million and waive all further claims to money distributed out of the Prime
bankruptcy estate.
On February 19, 1996, Arby's Restaurantes S.A. de C.V. ("AR"), the master
franchisee of Arby's in Mexico, commenced an action in the civil court of Mexico
against Arby's for breach of contract. AR alleged that a non-binding letter of
intent dated November 9, 1994 between AR and Arby's constituted a binding
contract pursuant to which Arby's had obligated itself to repurchase the master
franchise rights from AR for $2.85 million and that Arby's had breached a master
development agreement with AR. Arby's commenced an arbitration proceeding since
the franchise and development agreements each provided that all disputes
thereunder were to be resolved by arbitration. In September 1997, the arbitrator
ruled that (i) the November 9, 1994 letter of intent was not a binding contract
and (ii) the master development agreement was properly terminated. AR has the
right to challenge the arbitrator's decision. In May 1997, AR commenced an
action against Arby's in the United States District Court for the Southern
District of Florida alleging that (i) Arby's had engaged in fraudulent
negotiations with AR in 1994-1995, in order to force AR to sell the master
franchise rights for Mexico to Arby's cheaply and (ii) Arby's had tortiously
interfered with an alleged business opportunity that AR had with a third party.
Arby's has moved to dismiss that action. Arby's is vigorously contesting AR's
various claims and believes it has meritorious defenses to such claims.
On June 3, 1997, ZuZu, Inc. ("ZuZu") and its subsidiary, ZuZu Franchising
Corporation ("ZFC"), commenced an action against Arby's and Triarc in the
District Court of Dallas County, Texas alleging that Arby's and Triarc conspired
to steal the ZuZu Speedy Tortilla concept and convert it to their own use. ZuZu
seeks injunctive relief and actual damages in excess of $70.0 million and
punitive damages of not less than $200.0 million against Triarc for its alleged
appropriation of trade secrets, conversion and unfair competition. ZFC also made
a demand for arbitration with the Dallas, Texas office of the American
Arbitration Association ("AAA") seeking unspecified monetary damages from
Arby's, alleging that Arby's had breached a Master Franchise Agreement between
ZFC and Arby's. Arby's and Triarc have moved to dismiss or, in the alternative,
abate the Texas court action on the ground that a stock purchase agreement
between Triarc and ZuZu required that disputes be subject to mediation in
Wilmington, Delaware and that any litigation be brought in the Delaware courts.
On July 16, 1997, Arby's and Triarc commenced a declaratory judgment action
against ZuZu and ZFC in Delaware Chancery Court for New Castle County seeking a
declaration that the claims in both the litigation and the arbitration must be
subject to mediation in Wilmington, Delaware. In the arbitration proceeding,
Arby's has asserted counterclaims against ZuZu for unjust enrichment, breach of
contract and breach of the duty of good faith and fair dealing and has
successfully moved to transfer the proceeding to the Atlanta, Georgia office of
the AAA. The parties have agreed to suspend further proceedings pending
non-binding mediation. Arby's and Triarc are vigorously contesting plaintiffs'
claims in both the litigation and the arbitration and believe that plaintiffs'
various claims are without merit.
Snapple and Quaker are defendants in a breach of contract case filed on
April 16, 1997 in Rhode Island Superior Court by Rhode Island Beverage Packing
Company, L.P. ("RIB") prior to the Acquisition. RIB and Snapple disagree as to
whether the co-packing agreement between them had been amended to a) change the
end of the term from December 30, 1997 to December 30, 1999 and b) more than
double Snapple's take-or-pay obligations thereunder. RIB sets forth various
causes of action in its complaint. RIB seeks reformation of the contract,
compliance with promises, consequential damages including lost profits,
attorney's fees and punitive damages. On June 16, 1997, Snapple and Quaker filed
an answer to the complaint in which they denied all liability to RIB, denied the
material allegations of the complaint and raised various affirmative defenses.
Snapple and RIB have reached an agreement in principle to settle this action and
certain other outstanding issues among the parties. There can be no assurance
that such a settlement will be finalized.
In the second and third quarters of 1997, four purported class and
shareholder derivative actions were commenced against certain current and former
directors of the Company (and naming the Company as a nominal defendant). The
complaints allege, among other things, that the defendants breached their
fiduciary duties in allowing certain bonuses and stock options (collectively,
the "Grants") to be granted to the Chairman and Chief Executive Officer (the
"Chairman") and the President and Chief Operating Officer (collectively with the
Chairman, the "Executives") of the Company in 1994 and subsequent years, that
the Grants were contrary to the Company's 1994 proxy statement and, in the case
of two of the four actions, that such proxy statement misrepresented or omitted
material facts. The complaints seek, among other things, rescission of certain
stock options granted to the Executives and repayment to the Company by the
Executives of certain bonuses paid to them. The defendants have (i) moved to
dismiss one complaint, (ii) filed an answer generally denying the material
allegations of and asserting affirmative defenses to another complaint, (iii)
opposed the plaintiffs' voluntary notice of dismissal in another complaint and
(iv) not yet responded to a fourth complaint. On October 22, 1997 five former
directors of Triarc who are named as defendants in one of the above actions
filed an answer and cross-claim against the Company and the Chairman alleging,
among other things, certain violations by the Chairman and seeks, among other
items, an unspecified amount of damages. The Company will vigorously contest the
claims of the former directors and believes that such claims are without merit.
The Company has made provisions for legal and environmental matters during
the nine months ended September 28, 1997 and in prior years and has remaining
aggregate accruals of approximately $11.4 million. Based on currently available
information and given (i) the indemnification limitations with respect to the
SEPSCO cold storage operations and the TXL environmental matters, (ii) the
Company's responsibility for only 43% of the Partnership's environmental matter
representing its ownership in the Partnership (since November 1996), (iii)
potential reimbursements by other parties as discussed above and (iv) the
Company's aggregate reserves for such legal and environmental matters, the
Company believes that the legal and environmental matters referred to above, as
well as ordinary routine litigation incidental to its businesses, will not have
a material adverse effect on its consolidated results of operations or financial
position.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In February 1997 the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 128 ("SFAS 128")
"Earnings Per Share". SFAS 128 replaces the presentation of primary earnings per
share ("EPS") with a presentation of basic EPS, which excludes dilution and is
computed by dividing income by the weighted average number of common shares
outstanding during the period. SFAS 128 also requires the presentation of
diluted EPS, which is computed similarly to fully diluted EPS pursuant to
existing accounting requirements. SFAS 128 is effective for the Company's fourth
quarter of 1997 and, once effective, requires restatement of all prior period
EPS data presented. Had SFAS 128 been effective for the periods presented, the
effect on reported net income (loss) per share would have been as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
------------------------------- ------------------------------
SEPTEMBER 30, SEPTEMBER 28, SEPTEMBER 30, SEPTEMBER 28,
1996 1997 1996 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
As reported.................................... $1.60 $.35 $1.34 $ (.81)
As determined under SFAS 128
Basic................................... $1.69 $.36 $1.34 $ (.81)
Diluted................................. $1.68 $.35 $1.33 $ (.81)
</TABLE>
In June 1997 the FASB issued SFAS No. 130 ("SFAS 130") "Reporting
Comprehensive Income". SFAS 130 requires that all items that are required to be
recognized under accounting standards as components of comprehensive income be
reported in a financial statement that is displayed with the same prominence as
other financial statements. Comprehensive income is defined as the change in the
stockholders' equity during a period exclusive of stockholder investments and
distributions to stockholders. For the Company, in addition to net income
(loss), comprehensive income includes changes in net unrealized gains (losses)
on "available for sale" marketable securities and unearned compensation. In June
1997 the FASB also issued SFAS 131 ("SFAS 131") "Disclosures about Segments of
an Enterprise and Related Information" which supersedes SFAS 14 "Financial
Reporting for Segments of a Business Enterprise". SFAS 131 requires disclosure
in the Company's consolidated financial statements (including quarterly
condensed consolidated financial statements) of financial and descriptive
information by operating segment as used internally for evaluating segment
performance and deciding how to allocate resources to segments. SFAS 130 and 131
are effective for the Company's fiscal year beginning December 29, 1997
(exclusive of the quarterly segment data under SFAS 131 which is effective the
following fiscal year) and require comparative information for earlier periods
presented. The application of the provisions of both SFAS 130 and 131 will
require an additional financial statement and may result in changes to segment
disclosures but will not have any effect on the Company's reported financial
position and results of operations.
PART II. OTHER INFORMATION
The statements in this Quarterly Report on Form 10-Q that are not
historical facts, including, most importantly, those statements preceded by,
followed by, or that include the words "may," "believes," "expects,"
"anticipates," or the negation thereof, or similar expressions, constitute
"forward-looking statements" that involve risks, uncertainties and other factors
which may cause actual results, performance or achievements to be materially
different from any outcomes expressed or implied by such forward-looking
statements. For those statements, Triarc claims the protection of the safe
harbor for forward-looking statements contained in the Private Securities
Litigation Reform Art of 1995. Such factors include, but are not limited to, the
following: success of operating initiatives; development and operating costs;
advertising and promotional efforts; brand awareness; the existence or absence
of adverse publicity; market acceptance of new product offerings; changing
trends in consumer tastes; changes in business strategy or development plans;
quality of management; availability, terms and deployment of capital; business
abilities and judgment of personnel; availability of qualified personnel; labor
and employee benefit costs; availability and cost of raw materials and supplies;
changes in, or failure to comply with, government regulations; the costs and
other effects of legal and administrative proceedings; pricing pressures
resulting from competitive discounting; general economic, business and political
conditions in the countries and territories where Triarc operates; the impact of
such conditions on consumer spending; and other risks and uncertainties detailed
in Triarc's other current and periodic filings with the Securities and Exchange
Commission. Triarc will not undertake and specifically declines any obligation
to publicly release the result of any revisions which may be made to any
forward- looking statements to reflect events or circumstances after the date of
such statements or to reflect the occurrence of anticipated or unanticipated
events.
ITEM 1. LEGAL PROCEEDINGS
As reported in Triarc's Quarterly Report on Form 10-Q/A for the fiscal
quarter ended June 29, 1997 (the "10-Q/A"), Snapple Beverage Corp. ("Snapple")
and The Quaker Oats Company ("Quaker") are defendants in a breach of contract
case filed on April 16, 1997 in Rhode Island Superior Court by Rhode Island
Beverage Packaging Company, L.P. ("RIB"), prior to Triarc's acquisition of
Snapple. RIB and Snapple disagree as to whether the co-packing agreement between
them had been amended to (i) change the end of the term from December 30, 1997
to December 30, 1999 and (ii) more than double Snapple's take or pay obligations
thereunder. RIB sets forth various causes of action in its complaint, which are
described in the 10-Q/A. RIB seeks reformation of the contract, compliance with
promises, consequential damages including lost profits, attorney's fees and
punitive damages. On June 16, 1997, Snapple and Quaker filed an answer to the
complaint in which they denied all liability to RIB, denied the material
allegations of the complaint, and raised various affirmative defenses. Snapple
and RIB have reached an agreement in principle to settle this action and certain
other outstanding issues among the parties. However, there can be no assurance
that such a settlement will be finalized.
As reported in Triarc's Annual Report on Form 10-K for the year ended
December 31, 1996 (the "10-K"), on February 19, 1996 Arby's Restaurantes S.A. de
C.V. ("AR"), the master franchisee of Arby's in Mexico, commenced an action in
the civil court of Mexico against Arby's, Inc. ("Arby's") for breach of
contract. AR alleged that a non-binding letter of intent dated November 9, 1994
between AR and Arby's constituted a binding contract pursuant to which Arby's
had obligated itself to repurchase the master franchise right from AR for $2.85
million and that Arby's had breached a master development agreement with AR.
Arby's commenced an arbitration proceeding since the franchise and development
agreements each provided that all disputes thereunder were to be resolved by
arbitration. In September 1997, the arbitrator ruled that (i) the November 9,
1994 letter of intent was not a binding contract and (ii) the master development
agreement was properly terminated. AR has the right to challenge the
arbitrator's decision. In May 1997, AR commenced an action against Arby's in the
United States District Court for the Southern District of Florida alleging that
(i) Arby's had engaged in fraudulent negotiations with AR in 1994-1995, in order
to force AR to sell the master franchise rights for Mexico to Arby's cheaply and
(ii) Arby's had tortiously interfered with an alleged business opportunity that
AR had with a third party. Arby's has moved to dismiss that action. Arby's is
vigorously contesting AR's various claims and believes it has meritorious
defenses to such claims.
As reported in the 10-Q/A, on June 3, 1997, ZuZu, Inc. ("ZuZu") and its
subsidiary, ZuZu Franchising Corporation ("ZFC") commenced an action against
Arby's and Triarc in the District Court of Dallas County, Texas. Plaintiffs
allege that Arby's and Triarc conspired to steal the ZuZu Speedy Tortilla
concept and convert it to their own use. ZuZu seeks injunctive relief and actual
damages in excess of $70.0 million and punitive damages of not less than $200.0
million against Triarc for its alleged appropriation of trade secrets,
conversion and unfair competition. ZFC also made a demand for arbitration with
the Dallas, Texas office of the American Arbitration Association ("AAA") seeking
unspecified monetary damages from Arby's, alleging that Arby's had breached a
master franchise agreement between ZFC and Arby's. Arby's and Triarc have moved
to dismiss or, in the alternative, abate the Texas court action on the ground
that a stock purchase agreement between Triarc and ZuZu required that disputes
be subject to mediation in Wilmington, Delaware and that any litigation be
brought in the Delaware courts. On July 16, 1997, Arby's and Triarc commenced a
declaratory judgment action against ZuZu and ZFC in Delaware Chancery Court for
New Castle County seeking a declaration that the claims in both the litigation
and the arbitration must be subject to mediation in Wilmington, Delaware. In the
arbitration proceeding, Arby's has asserted counterclaims against ZuZu for
unjust enrichment, breach of contract and breach of the duty of good faith and
fair dealing and has successfully moved to transfer the proceeding to the
Atlanta, Georgia office of the AAA. The parties have agreed to suspend further
proceedings pending non-binding mediation. Arby's and Triarc are vigorously
contesting plaintiffs' claims in both the litigation and the arbitration and
believe that plaintiffs' various claims are without merit.
As reported in the 10-K and the 10-Q/A, in January 1997 the bankruptcy
trustee appointed in the case of Prime Capital Corporation ("Prime") (formerly
known as Intercapital Funding Resources, Inc.) commenced adversary proceedings
against two Triarc subsidiaries, Southeastern Public Service Company ("SEPSCO")
and Chesapeake Insurance Company Limited ("Chesapeake"), as well as actions
against two officers of Triarc with respect to payments made directly to them,
claiming certain payments to the defendants, including an aggregate of
approximately $5,300,000 to SEPSCO and Chesapeake, were preferences or
fraudulent transfers. The bankruptcy trustee and each of the defendants has
agreed to a settlement of the actions, which is subject to the bankruptcy
court's approval. Pursuant to such settlements, SEPSCO and Chesapeake would
collectively return approximately $3,550,000. In addition, each of the
defendants has agreed to waive all further claims to money distributed out of
the Prime bankruptcy.
As reported in the 10-Q/A, on August 13, 1997 Ruth LeWinter and Calvin
Shapiro commenced a purported class and derivative action against certain
current and former directors of Triarc (and naming Triarc as a nominal
defendant) in the United States District Court for the Southern District of New
York. On October 22, 1997, five former directors of Triarc, who are named as
defendants in the LeWinter action, filed an answer and cross-claim against
Triarc and Nelson Peltz. The cross-claim alleges that (1) Mr. Peltz has violated
an Undertaking and Agreement given by DWG Acquisition Group, L.P. on February 9,
1993; (2) Mr. Peltz has conspired with Steven Posner to violate a court order
prohibiting Mr. Posner from serving as an officer or director of Triarc; and (3)
the cross-claimants are entitled to indemnification from Triarc in the action.
The cross-claim seeks: specific enforcement of an indemnification agreement
between the cross- claimants and Triarc; damages in an unspecified amount in
excess of $75,000; and their costs and expenses in the action, including
attorneys' fees. On November 3, 1997, Triarc and certain defendants (including
all of its present directors) moved to dismiss or stay the action on the ground
that the same matters are before the court in the Delaware actions described
below.
As reported in the 10-Q/A, three other purported class and derivative
actions have been filed in the Delaware Court of Chancery, New Castle County,
naming as defendants certain current and former directors of Triarc (and naming
Triarc as a nominal defendant). The Delaware actions assert substantially
similar claims and seek substantially similar relief as the LeWinter action. On
November 7, 1997, the plaintiffs in one of the actions (Feder et al. v. Peltz et
al.) filed a voluntary notice of dismissal of the action, stating that they
intended to pursue the same claims in cooperation with the plaintiffs in the
LeWinter action. Defendants have opposed the plaintiffs' effort to dismiss the
Delaware action on the ground that the matters at issue should be litigated in
Delaware and not in New York. Also on November 7, 1997, defendants served and
filed an answer in the second Delaware action (Malekan et al. v. Peltz et al.),
generally denying the material allegations of the complaints and asserting
various affirmative defenses. Defendants have not yet responded to the complaint
in the third Delaware action.
ITEM 5.
OTHER INFORMATION
Cable Car Acquisition
As previously reported, on June 24, 1997, Triarc and Cable Car Beverage
Corporation ("Cable Car") entered into a definitive agreement (the "Merger
Agreement") pursuant to which Triarc will acquire Cable Car (the "Cable Car
Acquisition") through the merger of a wholly-owned subsidiary of Triarc into
Cable Car, with Cable Car being the surviving corporation. Accordingly,
following the merger, Cable Car will become a wholly-owned subsidiary of Triarc.
Cable Car, which markets premium soft drinks and waters in the United States and
Canada, primarily under the Stewart's(R) brand, had 1996 sales of approximately
$18.8 million. Cable Car has set the close of business on October 23, 1997 as
the record date for a special meeting of stockholders to be held on November 25,
1997, at which Cable Car's stockholders will vote upon a proposal to approve the
Merger Agreement. If approved by Cable Car's stockholders, the Cable Car
Acquisition is expected to close immediately thereafter.
Stock Repurchase Program
On October 13, 1997, Triarc announced that its management was authorized,
when and if market conditions warrant, to purchase from time to time during the
12-month period commencing on October 13, 1997 up to $20 million of its
outstanding Class A Common Stock. Purchases under the program, if any, will not
commence until after the consummation of the Cable Car Acquisition. Triarc's
previous open market purchase program expired in July 1997.
ITEM 6.
EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
3.1 - Certificate of Incorporation of Triarc, as currently in effect,
incorporated herein by reference to Exhibit 3.1 to Triarc's
Registration Statement on Form S-4 dated October 22, 1997 (SEC File
No. 1-2207).
4.1 - Indenture dated as of August 1, 1993 among RC/Arby's Corporation
("RCAC"), Royal Crown Company, Inc., Arby's, Inc. ("Arby's) and The
Bank of New York, as Trustee, relating to RCAC's 9-3/4% Senior Secured
Notes Due 2000, incorporated herein by reference to Exhibit 4.2 to
Triarc's Registration Statement on Form S-4 dated October 22, 1997
(SEC File No. 1-2207).
4.2 - Master Agreement dated as of May 5, 1997, among Franchise Finance
Corporation of America, FFCA Acquisition Corporation, FFCA Mortgage
Corporation, Triarc, Arby's Restaurant Development Corporation
("ARDC"), Arby's Restaurant Holding Company ("ARHC"), Arby's
Restaurant Operations Company ("AROC"), Arby's, RTM Operating Company
("RTMOC"), RTM Development Company, RTM Partners, Inc. ("Holdco"), RTM
Holding Company, Inc. ("RTM Parent"), RTM Management Company, LLC
("RTMM") and RTM, Inc. (RTM"), incorporated herein by reference to
Exhibit 4.16 to Triarc's Registration Statement on Form S-4 dated
October 22, 1997 (SEC File No. 1- 2207).
10.1 - Option granted by Holdco in favor of ARHC, together with a schedule
identifying other documents omitted and the material details in which
such documents differ, incorporated herein by reference to Exhibit
10.30 to Triarc's Registration Statement on Form S-4 dated October 22,
1997 (SEC File No. 1-2207).
10.2 - Guaranty dated as of May 5, 1997 by RTM, RTM Parent, Holdco, RTMM
and RTMOC in favor of Arby's ARDC, ARHC, AROC and Triarc, incorporated
herein by reference to Exhibit 10.31 to Triarc's Registration
Statement on Form S-4 dated October 22, 1997 (SEC File No. 1-2207).
27.1 - Financial Data Schedule for the nine months ended September 28,
1997, submitted to the Securities and Exchange Commission in
electronic format.*
-----------------
*Filed herewith.
(b) Reports on Form 8-K
The Registrant filed a report on Form 8-K/A on August 5, 1997,
amending the report on Form 8-K filed by the Registrant on June 6,
1997, which Form 8-K/A included certain financial statements required
to be filed in connection with the acquisition of Snapple Beverage
Corp.
The Registrant filed a report on Form 8-K on August 4, 1997
with respect to certain subsidiaries of the Registrant completing the
sale of their rights to the C&C beverage line, including the C&C
trademark, to Kelco Sales & Marketing Inc.
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 12, 1997 By: John L. Barnes, Jr.
-------------------
John L. Barnes, Jr.
Senior Vice President and
Chief Financial Officer
By: Fred H. Schaefer
--------------------
Fred H. Schaefer
Vice President and
Chief Accounting Officer
(Principal accounting officer)
Exhibit Index
Exhibit
No. Description Page No.
3.1 - Certificate of Incorporation of Triarc, as currently in
effect, incorporated herein by reference to Exhibit 3.1 to
Triarc's Registration Statement on Form S-4 dated
October 22, 1997 (SEC File No. 1-2207).
4.1 - Indenture dated as of August 1, 1993 among RC/Arby's
Corporation ("RCAC"), Royal Crown Company, Inc.,
Arby's, Inc. ("Arby's) and The Bank of New York, as
Trustee, relating to RCAC's 9-3/4% Senior Secured
Notes Due 2000, incorporated herein by reference to
Exhibit 4.2 to Triarc's Registration Statement on Form
S-4 dated October 22, 1997 (SEC File No. 1-2207).
4.2 - Master Agreement dated as of May 5, 1997, among
Franchise Finance Corporation of America, FFCA
Acquisition Corporation, FFCA Mortgage Corporation,
Triarc, Arby's Restaurant Development Corporation
("ARDC"), Arby's Restaurant Holding Company
("ARHC"), Arby's Restaurant Operations Company
("AROC"), Arby's, RTM Operating Company
("RTMOC"), RTM Development Company, RTM
Partners, Inc. ("Holdco"), RTM Holding Company, Inc.
("RTM Parent"), RTM Management Company, LLC
("RTMM") and RTM, Inc. (RTM"), incorporated herein
by reference to Exhibit 4.16 to Triarc's Registration
Statement on Form S-4 dated October 22, 1997 (SEC
File No. 1-2207).
10.1 - Option granted by Holdco in favor of ARHC, together
with a schedule identifying other documents omitted and
the material details in which such documents differ,
incorporated herein by reference to Exhibit 10.30 to
Triarc's Registration Statement on Form S-4 dated
October 22, 1997 (SEC File No. 1-2207).
10.2 - Guaranty dated as of May 5, 1997 by RTM, RTM
Parent, Holdco, RTMM and RTMOC in favor of Arby's
ARDC, ARHC, AROC and Triarc, incorporated herein
by reference to Exhibit 10.31 to Triarc's Registration
Statement on Form S-4 dated October 22, 1997 (SEC
File No. 1-2207).
27.1 - Financial Data Schedule for the nine months ended September
28, 1997, submitted to the Securities and Exchange Commission
in electronic format.
<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 28, 1997 AND IS QUALIFIED IN ITS ENTIRELY BY REFERENCE TO SUCH
FORM 10-Q
</LEGEND>
<CIK> 0000030697
<NAME> TRIARC COMPANIES INC.
<MULTIPLIER> 1,000
<CURRENCY> U.S.Dollars
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-28-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-28-1997
<EXCHANGE-RATE> 1
<CASH> 69,149
<SECURITIES> 57,246
<RECEIVABLES> 117,063
<ALLOWANCES> 0
<INVENTORY> 93,570
<CURRENT-ASSETS> 391,048
<PP&E> 232,527
<DEPRECIATION> 112,535
<TOTAL-ASSETS> 1,136,359
<CURRENT-LIABILITIES> 264,429
<BONDS> 737,273
0
0
<COMMON> 3,398
<OTHER-SE> (18,538)
<TOTAL-LIABILITY-AND-EQUITY> 1,136,359
<SALES> 658,942
<TOTAL-REVENUES> 706,524
<CGS> 402,813
<TOTAL-COSTS> 402,813
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 2,940
<INTEREST-EXPENSE> 54,807
<INCOME-PRETAX> (25,876)
<INCOME-TAX> 5,693
<INCOME-CONTINUING> (21,406)
<DISCONTINUED> 0
<EXTRAORDINARY> (2,954)
<CHANGES> 0
<NET-INCOME> (24,360)
<EPS-PRIMARY> (.81)
<EPS-DILUTED> 0
</TABLE>
