- -------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 8-K/A
(AMENDMENT NO. 1)
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): May 22, 1997
TRIARC COMPANIES, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware 1-2207 38-0471180
-------- ------ ----------
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
280 Park Avenue
New York, New York 10017
------------------ -----
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (212) 451-3000
-----------------------------
(Former Name or Former Address, if
Changed Since Last Report)
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<PAGE>
This Form 8-K/A of Triarc Companies, Inc. ("Triarc") constitutes
Amendment No. 1 to Triarc's Current Report on Form 8-K (the "Original Form 8-K")
which was filed with the Securities and Exchange Commission on June 6, 1997.
This amendment furnishes information required by Item 7 of the Form.
Certain statements in this Current Report on Form 8-K that are not
historical facts constitute "forward-looking statements" within the meaning of
the Private Securities Litigation Reform Act of 1995 (the "Reform Act"). Such
forward-looking statements involve risks, uncertainties and other factors which
may cause the actual results, performance or achievements of Triarc Companies,
Inc. ("Triarc") and its subsidiaries to be materially different from any future
results, performance or achievements express or implied by such forward-looking
statements. Such factors include, but are not limited to, the following: general
economic and business conditions; competition; success of operating initiatives;
development and operating costs; advertising and promotional efforts; brand
awareness; the existence or absence of adverse publicity; acceptance of new
product offerings; changing trends in customer 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; and other risks and uncertainties detailed in
Triarc's Annual Report on Form 10-K for the year ended December 31, 1996. 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 2. ACQUISITION OR DISPOSITION OF ASSETS.
As previously disclosed, on May 22, 1997 the Registrant completed the
acquisition (the "Snapple Acquisition") of all of the outstanding capital stock
of Snapple Beverage Corp. ("Snapple") from The Quaker Oats Company ("Quaker")
for $300 million in cash (plus an $8,000,000 post-closing adjustment paid to
date and subject to additional post-closing adjustments). Snapple, which markets
and distributes ready-to-drink teas and juice drinks, had sales for 1996 of
approximately $550 million, and is considered the market leader in the juice
drinks category. Snapple, together with Mistic Brands, Inc. ("Mistic") and Royal
Crown Company, Inc., each of which the Registrant also owns, operate as part of
the Triarc Beverage Group. A $380 million bank financing was provided by
affiliates of Donaldson Lufkin & Jenrette and Morgan Stanley, Inc. Proceeds from
the financing were principally used to finance the Snapple Acquisition, to
refinance existing indebtedness of Mistic of approximately $70 million and to
pay certain fees and expenses associated with the Snapple Acquisition and the
related financing. As of the closing date of the Snapple Acquisition, neither
Quaker nor Snapple had any material relationship with the Registrant or any of
its affiliates, any director or any officer of the Registrant or any associate
of any such director or officer.
A copy of the Stock Purchase Agreement relating to the Snapple
Acquisition was previously filed by the Registrant in its Current Report on Form
8-K dated March 31, 1997 (SEC File No. 1-2207) . Copies of the credit agreement
and the press release with respect to the closing of the Snapple Acquisition
were also previously filed by the Registrant in its Current Report on Form 8-K
dated May 22, 1997 (SEC File No. 1-2207) .
<PAGE>
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) Financial Statements of Businesses Acquired
The financial statements, together with the notes thereto, of the
business acquired (referred to herein as "Snapple") reflecting the historical
results of Snapple required by this part, are set forth below.
(i) Audited combined financial statements of Snapple for
the year ended December 31, 1996.
(ii) Unaudited combined financial statements of Snapple for
the three months ended March 31, 1997.
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
The Quaker Oats Company:
We have audited the accompanying combined statement of assets acquired and
liabilities assumed (as described in Note 2) of the Snapple Beverage Business
(the "Snapple Business" as described in Note 1) of The Quaker Oats Company, as
of December 31, 1996, and the accompanying combined statements of certain
revenues and operating expenses (as described in Note 2) of the Snapple Business
for the eleven-month and six-day period ended December 6, 1994, the twenty-five
day period ended December 31, 1994 and the years ended December 31, 1995 and
December 31, 1996. These statements are the responsibility of the Snapple
Business' management. Our responsibility is to express an opinion on these
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
The statements have been prepared pursuant to the Stock Purchase Agreement
between The Quaker Oats Company and Triarc Companies, Inc. dated March 27, 1997,
as amended (described in Note 1), and are not intended to be a complete
presentation of the assets and liabilities or the revenues and operating
expenses on a stand-alone basis of the Snapple Business of The Quaker Oats
Company.
In our opinion, the statements referred to above present fairly, in all material
respects, the assets acquired and liabilities assumed of the Snapple Business as
of December 31, 1996, and certain revenues and operating expenses of the Snapple
Business for the eleven-month and six-day period ended December 6, 1994, the
twenty-five day period ended December 31, 1994 and the years ended December 31,
1995 and December 31, 1996, and in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Chicago Illinois
June 20, 1997
<PAGE>
<TABLE>
<CAPTION>
SNAPPLE BEVERAGE BUSINESS OF
THE QUAKER OATS COMPANY
COMBINED STATEMENT OF ASSETS ACQUIRED AND LIABILITIES ASSUMED
DECEMBER 31, 1996
(IN THOUSANDS)
ASSETS
<S> <C>
Current assets:
Cash and cash equivalents.......................................................... $ 4,400
Trade accounts receivable, net of allowances of $5,100............................. 20,400
Inventories:
Finished goods.................................................................. 18,700
Raw materials................................................................... 3,800
Packaging materials and supplies................................................ 3,000
---------------
Total inventories............................................................ 25,500
Vending equipment held for placement............................................... 12,200
Other current assets............................................................... 5,600
---------------
Total current assets......................................................... 68,100
Property:
Capital leases and leasehold improvements.......................................... 3,500
Machinery and equipment............................................................ 35,700
---------------
Gross property.................................................................. 39,200
Less accumulated depreciation...................................................... 11,300
---------------
Property, net................................................................... 27,900
Intangible assets, net of amortization ................................................. 1,790,100
Other assets............................................................................ 17,200
---------------
Total assets................................................................. $ 1,903,300
===============
LIABILITIES AND EQUITY
Current liabilities:
Trade accounts payable............................................................. $ 10,800
Accrued vacation, severance and sales incentives................................... 3,000
Accrued advertising and merchandising.............................................. 8,200
Copacker contract liabilities...................................................... 18,400
Litigation and claims accrual...................................................... 7,700
Other accrued liabilities.......................................................... 12,600
---------------
Total current liabilities.................................................... 60,700
Long term debt.......................................................................... 300
Other liabilities....................................................................... 1,500
---------------
Total liabilities............................................................ 62,500
---------------
Net assets acquired and liabilities assumed............................................. $ 1,840,800
===============
The accompanying notes to the combined financial statements are an integral part of this statement.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SNAPPLE BEVERAGE BUSINESS OF
THE QUAKER OATS COMPANY
COMBINED STATEMENTS OF CERTAIN REVENUES AND OPERATING EXPENSES
ELEVEN MONTHS
AND SIX DAYS TWENTY-FIVE DAYS TWELVE MONTHS
ENDED ENDED ENDED
DECEMBER 6, DECEMBER 31, DECEMBER 31,
-----------------------
1994 1994 1995 1996
---- ---- ---- ----
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Net sales.............................................$ 648,600 $ 27,200 $ 608,000 $ 550,800
Cost of goods sold.................................... 427,900 18,300 420,200 352,900
----------- ----------- -------------- -------------
Gross profit................................... 220,700 8,900 187,800 197,900
----------- ----------- -------------- -------------
Advertising and merchandising......................... 85,500 2,900 142,800 145,800
Marketing and selling................................. 17,700 1,200 34,300 42,600
Amortization of intangibles........................... 9,500 3,700 53,700 54,200
Other general and administrative expenses............. 48,400 2,000 52,000 39,700
----------- ----------- -------------- -------------
Total selling, general and
administrative expenses...................... 161,100 9,800 282,800 282,300
Restructuring charges ................................ -- -- 24,400 16,600
----------- ----------- -------------- -------------
Income (loss) before interest and income taxes $ 59,600 $ (900) $ (119,400) $ (101,000)
============ ========== ============= ============
The accompanying notes to the combined financial statements are an integral part of these statements.
</TABLE>
<PAGE>
SNAPPLE BEVERAGE BUSINESS OF
THE QUAKER OATS COMPANY
NOTES TO THE COMBINED FINANCIAL STATEMENTS
(1) PRINCIPLES OF COMBINATION
The financial statements include certain assets and liabilities and the
operations of the Snapple Beverage Business (Snapple Business). The Snapple
Business is engaged in the production, marketing and distribution of beverages
under the Snapple trademark and related trademarks and trade names through
Snapple Beverage Corp. (Snapple) and its subsidiaries, as well as through The
Quaker Oats Company (Quaker), a New Jersey corporation, and certain affiliates
of Quaker. Snapple, a Delaware corporation, is a wholly-owned subsidiary of
Quaker. Refer to Note 2, "Basis of Presentation," for further discussion
regarding the presentation of the financial statements. The Snapple Business has
U.S. and international operations. All significant intercompany transactions
have been eliminated.
On December 6, 1994, Quaker purchased Snapple for a tender-offer price of
$1.7 billion. The acquisition was accounted for as a purchase and the results of
the Snapple Business were included in Quaker's consolidated financial statements
from the acquisition date through the divestiture date. The information provided
herein for the period ended December 6, 1994, represents the results of the
Snapple Business prior to its acquisition by Quaker and may not be comparable to
the other periods presented.
On May 22, 1997, Quaker completed the sale of 100 percent of the shares of
Snapple to Triarc Companies, Inc. (Triarc), a Delaware corporation located in
New York, New York, for $300 million, subject to certain adjustments. In
addition, certain other assets and liabilities related to the Snapple Business
were transferred to Triarc or its affiliates.
(2) BASIS OF PRESENTATION
The financial statements have been prepared pursuant to the terms of the
Stock Purchase Agreement (Agreement) between Quaker and Triarc. The Snapple
Business was not separately accounted for as a business segment of Quaker as it
was operated as a product line of Quaker's beverages business. Line of business
reporting for the Snapple Business prepared for managerial purposes contained
allocations of the expenses of Quaker's beverages business including supply
chain (procurement, production and quality control), human resource, finance and
accounting functions. In addition, certain other expenses were allocated to the
Snapple Business including certain research and development, information
services, human resource, finance, legal and administrative functions that were
performed on a company-wide basis for the benefit of all operating businesses of
Quaker, including the beverages business. Separate specific balance sheet
accounts were not maintained for items including, but not limited to, accounts
payable, employee-related liabilities, taxes or financing. As a result, the
distinct and separate accounts necessary to present complete separate financial
statements of the Snapple Business have not been maintained by Quaker since
Snapple was acquired.
As a result of the relationship between Snapple and Quaker, the financial
position and results of operations are not indicative of the results of the
Snapple Business had it been a stand-alone entity. Additionally, these financial
statements are not indicative of the future financial position or results of
operations of the Snapple Business.
<PAGE>
SNAPPLE BEVERAGE BUSINESS OF
THE QUAKER OATS COMPANY
NOTES TO THE COMBINED FINANCIAL STATEMENTS
COMBINED STATEMENT OF ASSETS ACQUIRED AND LIABILITIES ASSUMED
The Combined Statement of Assets Acquired and Liabilities Assumed consists
of the assets and liabilities which were acquired by, or assumed by Triarc.
Deferred tax assets and liabilities are excluded from the Combined Statement of
Assets Acquired and Liabilities Assumed.
Certain assets and liabilities related to the Snapple Business were
retained by Quaker, including, among other things, a manufacturing facility and
income tax liabilities pertaining to periods prior to the acquisition of the
Snapple Business by Triarc.
COMBINED STATEMENTS OF CERTAIN REVENUES AND OPERATING EXPENSES
The Combined Statements of Certain Revenues and Operating Expenses reflect
the sales and substantially all of the costs of operating the Snapple Business
in the normal and ordinary course. These costs include direct expenses and
certain shared expenses incurred by Quaker on behalf of the Snapple Business.
Management believes that the methods of allocating shared expenses to the
Snapple Business are reasonable and approximate the costs of actual services
provided. Refer to Note 5, "Supplementary Expense Information," for further
discussion. Interest and income taxes are excluded.
ESTIMATES AND ASSUMPTIONS
The preparation of the financial statements in conformity with Generally
Accepted Accounting Principles (GAAP) requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results may differ from these estimates.
(3) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CASH AND CASH EQUIVALENTS
Cash equivalents are composed of all highly liquid investments with an
original maturity of three months or less.
INVENTORIES
Inventories were valued at the lower of average quarterly cost or market
and include the cost of raw materials, labor and overhead.
COMMODITY OPTIONS AND FUTURES
Commodity options and futures contracts were used in the management of
commodity price exposures. Realized and unrealized gains and losses on commodity
options and futures contracts that hedged commodity price exposures were
deferred and subsequently included in the cost of goods sold as the finished
goods inventory was sold.
<PAGE>
SNAPPLE BEVERAGE BUSINESS OF
THE QUAKER OATS COMPANY
NOTES TO THE COMBINED FINANCIAL STATEMENTS
LONG-LIVED ASSETS
Long-lived assets are comprised of intangible assets and fixed assets.
Long-lived assets, including certain identifiable intangibles and goodwill
related to those assets to be held and used, are reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount of
the asset may not be recoverable. An estimate of undiscounted future cash flows
produced by the asset, or the appropriate grouping of assets, is compared to the
carrying amount to determine whether an impairment exists. If an asset is
determined to be impaired, the loss is measured based on quoted market prices in
active markets, if available. If quoted market prices are not available, the
estimate of fair value is based on the best information available, including
considering prices for similar assets and results of valuation techniques to the
extent available.
Snapple long-lived assets, including intangible assets, were evaluated as
of December 31, 1996, pursuant to the provisions of Financial Accounting
Standards Board (FASB) Statement No.121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." Estimated
undiscounted future cash flows were compared to the carrying value of Snapple
long-lived assets, including intangible assets. As the estimated undiscounted
future cash flows exceeded the carrying value of long-lived assets, an
impairment loss was not required or permitted to be recognized at December 31,
1996.
On March 27, 1997, Quaker entered into an agreement to sell Snapple to
Triarc. Under the provisions of FASB Statement No.121, Snapple was then
considered an asset held for sale and as such the carrying value of Quaker's
basis in the Snapple Business was reduced to fair market value. The fair market
value used in determining the related pretax impairment loss of $1.4 billion
recorded in the first quarter of 1997 was based on the sale price of $300
million.
Intangibles
Intangible assets consist of goodwill, trademarks, proprietary formulas and
distribution network/rights. Intangible assets are amortized on a straight-line
basis. The balances of intangible assets at December 31, 1996, along with the
related amortization periods, are as follows (in thousands):
<TABLE>
<CAPTION>
INTANGIBLE
LESS ASSETS - AMORTIZATION
INTANGIBLE ACCUMULATED NET OF PERIOD
ASSETS AMORTIZATION AMORTIZATION (IN YEARS)
------ ------------ ------------ ----------
<S> <C> <C> <C>
Goodwill..............................................$ 1,336,500 $ 72,500 $ 1,264,000 30-40
Trademark - Snapple................................... 440,000 22,800 417,200 40
Trademark - Made From The Best
Stuff on Earth................................... 6,000 1,800 4,200 7
Property formulas..................................... 75,200 10,500 64,700 15
Distribution network/rights........................... 44,000 4,000 40,000 10-30
------------- ----------- --------------
Intangible assets.....................................$ 1,901,700 $ 111,600 $ 1,790,100
============= =========== ==============
</TABLE>
<PAGE>
SNAPPLE BEVERAGE BUSINESS OF
THE QUAKER OATS COMPANY
NOTES TO THE COMBINED FINANCIAL STATEMENTS
Property and Depreciation
Capital leases and leasehold improvements and machinery and equipment were
reported at cost and depreciated on a straight-line basis over the estimated
useful lives. Useful lives were 3 to 12 years for machinery and equipment.
Depreciation expense for the years ended December 31, 1995 and 1996, was $4.2
million and $5.6 million, respectively. Depreciation expense for the eleven
months and six days ended December 6, 1994, and the twenty-five days ended
December 31, 1994, was $2.2 million and $0.2 million, respectively.
ADVERTISING COSTS
In accordance with Statement of Position No. 93-7, "Reporting on
Advertising Costs," the Snapple Business expenses all advertising expenses as
incurred except for production costs which are deferred and expensed when
advertisements air for the first time. The amount of production costs deferred
and included in the balance sheet at December 31, 1996, was not significant.
FOREIGN CURRENCY TRANSLATION
Assets and liabilities of the international operations of the Snapple
Business were translated at exchange rates in effect as of the balance sheet
date, while income and expenses were translated at average rates for the periods
presented. Translation gains and losses were not material.
(4) RESTRUCTURING CHARGES
In September 1996, the Snapple Business recorded a restructuring charge of
$16.6 million related to a change in how Snapple beverages are sold in certain
Texas markets. Estimated savings from this restructuring action are expected to
be about $2 million annually beginning in 1997, of which approximately 90
percent will be in cash.
In December 1995, the Snapple Business recorded a restructuring charge of
$24.4 million to reduce the amount of contract manufacturing capacity in the
supply chain system. Estimated savings from this restructuring action of about
$7 million annually, with approximately 90 percent in cash, have been in line
with expectations. Refer to Note 8, "Copacker Contract Liabilities," for further
discussion.
<PAGE>
SNAPPLE BEVERAGE BUSINESS OF
THE QUAKER OATS COMPANY
NOTES TO THE COMBINED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
The restructuring charges and utilization to date are as follows (in
thousands):
AS OF
AMOUNTS CHARGED DECEMBER 31, 1996
NON- AMOUNT REMAINING
-------------------------------- -----------------------
CASH CASH TOTAL UTILIZED RESERVE
---- ---- ----- -------- -------
1995
<S> <C> <C> <C> <C> <C>
Loss on reduction of contract
manufacturing capacity..............................$ 22,500 $ 1,900 $ 24,400 $ 12,400 $ 12,000
=========== =========== =========== =========== ==========
1996
Severance and termination benefits....................$ 500 $ -- $ 500 $ 300 $ 200
Asset write-offs...................................... -- 13,700 13,700 12,000 1,700
Loss on lease and other .............................. 2,400 -- 2,400 -- 2,400
----------- ----------- ----------- ----------- ----------
Subtotal.............................................. 2,900 13,700 16,600 12,300 4,300
----------- ----------- ----------- ----------- ----------
Total .............................................$ 25,400 $ 15,600 $ 41,000 $ 24,700 $ 16,300
=========== =========== =========== =========== ==========
</TABLE>
(5) SUPPLEMENTARY EXPENSE INFORMATION
The Snapple Business conducted its operations as an integrated component of
Quaker's beverages business. Certain shared operating and general and
administrative expenses were allocated to the Snapple Business by Quaker.
Management believes that the methods used for allocating these expenses were
reasonable.
Selling, general and administrative expenses were as follows (in thousands):
<TABLE>
<CAPTION>
ELEVEN
MONTHS AND TWENTY-FIVE
SIX DAYS DAYS
ENDED ENDED TWELVE MONTHS ENDED
DECEMBER 6, DECEMBER 31, DECEMBER 31,
----------------------
1994 1994 1995 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Advertising and merchandising..........................$ 85,500 $ 2,900 $ 142,800 $ 145,800
Selling and marketing (a) (b).......................... 17,700 1,200 34,300 42,600
Amortization of intangibles............................ 9,500 3,700 53,700 54,200
Other general and administrative
expenses (a) (b) (c)................................. 48,400 2,000 52,000 39,700
----------- ---------- ----------- ------------
Total selling, general and
administrative expenses..............................$ 161,100 $ 9,800 $ 282,800 $ 282,300
=========== ========== =========== ============
</TABLE>
(a) Shared Operating Expenses- Quaker allocated a portion of shared operating
expenses including broker selling expenses, certain other marketing
expenses, certain other product research expenses, and certain other
general and administrative services to the Snapple Business. These expenses
were allocated to the Snapple Business on a basis that approximates actual
costs of services provided as determined by various measures. The Snapple
Business also participated in Quaker's consolidated insurance and risk
management programs for property and casualty insurance. The Snapple
Business was directly charged for related insurance costs.
<PAGE>
SNAPPLE BEVERAGE BUSINESS OF
THE QUAKER OATS COMPANY
NOTES TO THE COMBINED FINANCIAL STATEMENTS
(b) Employees- Certain employees of the Snapple Business were employed by
Quaker and their compensation was paid by Quaker. These employees also
participated in certain Quaker employee benefit plans. The Snapple Business
was directly charged for actual salary costs and allocated fringe benefit
costs. The allocated fringe benefit costs were allocated based on actual
salary costs. Employees who were primarily employed in the Snapple Business
on May 22, 1997, other than certain nontransferred employees as provided in
the Agreement, were transferred to Triarc on the date of sale.
(c) Corporate Overhead Allocations- Quaker provided certain corporate general
and administrative services to the Snapple Business including human
resources, legal, finance, facility management and utilities. These
expenses were allocated to the Snapple Business on a basis that
approximates actual services provided as determined by various measures.
(6) SELECTED CASH FLOW INFORMATION
Due to the relationship between the Snapple Business and Quaker and the
basis of presentation of the financial statements contained herein (Refer to
Note 2, "Basis of Presentation"), the selected cash flow information presented
below is not indicative of what the cash flows of the Snapple Business would
have been if it had been a stand-alone entity or indicative of future cash flows
of the Snapple Business (in thousands).
YEAR ENDED
DECEMBER 31, 1996
-----------------
Cash used in operating activities (a).....................$ (29,000)
Cash used in investing activities (b)..................... (9,200)
Cash provided by financing activities (c)................. 37,300
-----------
Net decrease in cash and cash equivalents.................$ (900)
===========
(a) Operating Activities- Cash used in operating activities is primarily
comprised of the net loss before interest and income taxes, adjusted
for depreciation and amortization, and a decrease in accrued
liabilities, partly offset by decreases in trade accounts receivable
and inventory of approximately $21 million and $11 million,
respectively.
(b) Investing Activities- The principal component of cash used in investing
activities is capital expenditures related to machinery and equipment
included in the Combined Statement of Assets Acquired and Liabilities
Assumed as of December 31, 1996.
(c) Financing Activities- Cash advances made by Quaker to cover operating
expenses and capital requirements of the Snapple Business are the
principal component of cash provided by financing activities.
<PAGE>
(7) FINANCIAL INSTRUMENTS
Financial instruments were primarily used to reduce the impact of commodity
price fluctuations. The main financial instruments used were commodity options
and futures contracts.
The commodity hedge instruments were used to reduce the risk that raw
material purchases would be adversely affected as commodity prices changed.
While the hedge instruments were subject to the risk of loss from decreasing
commodity prices, any losses would be generally offset by reduced costs of the
purchases being hedged. Quaker, acting on behalf of the Snapple Business, did
not trade these instruments with the objective of earning financial gains on the
commodity price fluctuations, nor did it trade in commodities for which there
were no underlying exposures. Quaker's management believes that its use of
financial instruments to reduce the effects of commodity price fluctuation was
in the best interest of the Snapple Business.
Primarily purchases of corn sweetener were hedged for the Snapple Business.
For the twelve months ending December 31, 1995 and 1996, approximately $23.9
million and $21.0 million, respectively, of the cost of goods sold was in hedged
corn sweetener. Quaker's strategy is typically to hedge certain production
requirements for various periods up to 12 months. As of December 31, 1995 and
1996, approximately 51 percent and 39 percent, respectively, of hedgeable
production requirements for the next 12 months were hedged. Realized losses
charged to cost of goods sold in 1995 were immaterial. No realized gains or
losses related to commodity options and futures contracts were deferred as of
December 31, 1996. Realized gains credited to cost of goods sold in 1996 were
$2.1 million. The unrealized losses on open commodity instruments as of December
31, 1996, based on quotes from brokers, were net losses of $0.9 million.
(8) COPACKER CONTRACT LIABILITIES
The Snapple Business has entered into long-term agreements with certain
copackers (contract manufacturers). These arrangements require the Snapple
Business to purchase minimum volumes over various determined time periods
through 2000. Inventory product costs under these arrangements include a
case-rate packing fee plus a fixed fee, if any, that is incurred if the minimum
volume is not met. At December 31, 1996, an accrual of $6.4 million was
established for fixed fees incurred in 1996. In conjunction with restructuring
actions taken in December 1995, an accrual was established for fixed fees for
certain agreements where it was anticipated that production capacity would not
be used through the duration of the agreements. The accrual balance related to
these fixed fees at December 31, 1996, was $12.0 million. Based on forecasted
volumes and margins, no other minimum volume fees have been accrued as of
December 31, 1996. Changes in assumptions, as well as actual experience, could
cause these estimates to change. Refer to Note 4, "Restructuring Charges," for
further discussion.
(9) LITIGATION AND CLAIMS
The Snapple Business is a party to a number of lawsuits and claims, which
have been vigorously defended. Such matters arise out of the normal course of
business and other issues. Certain of these actions seek damages in large
amounts. While the results of litigation cannot be predicted with certainty, it
is believed that the final outcome of such litigation will not have a material
adverse effect on the consolidated financial position or results of operations
of the Snapple Business. Changes in assumptions, as well as actual experience,
could cause these estimates to change.
<PAGE>
<TABLE>
<CAPTION>
SNAPPLE BEVERAGE BUSINESS OF
THE QUAKER OATS COMPANY
COMBINED STATEMENTS OF ASSETS ACQUIRED AND LIABILITIES ASSUMED
(IN THOUSANDS)
MARCH 31, MARCH 31,
1996 1997
---- ----
(UNAUDITED)
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents............................................................$ 6,200 $ 4,700
Trade accounts receivable, net of allowances of $6,200 and $5,000
as of March 31, 1996 and 1997, respectively........................................ 57,100 26,600
Inventories:
Finished goods................................................................... 37,100 27,700
Raw materials.................................................................... 9,800 5,400
Packaging materials and supplies................................................. 4,300 3,900
--------------- ------------
Total inventories.......................................................... 51,200 37,000
Vending equipment held for placement................................................. 13,700 11,800
Other current assets................................................................. 10,700 4,400
--------------- ------------
Total current assets....................................................... 138,900 84,500
Property:
Capital leases and leasehold improvements............................................ 3,300 3,300
Machinery and equipment.............................................................. 32,000 32,500
--------------- ------------
Gross property................................................................... 35,300 35,800
Less accumulated depreciation........................................................ 7,500 11,200
--------------- ------------
Property, net.................................................................... 27,800 24,600
Intangible assets, net of amortization ................................................... 1,828,800 272,700
Other assets ........................................................................... 17,500 15,600
--------------- ------------
Total assets...............................................................$ 2,013,000 $ 397,400
=============== ============
LIABILITIES AND EQUITY
Current liabilities:
Trade accounts payable...............................................................$ 25,300 $ 19,600
Accrued vacation, severance and sales incentives..................................... 1,300 1,900
Accrued advertising and merchandising................................................ 15,900 11,900
Copacker contract liabilities........................................................ 22,000 12,700
Litigation and claims accrual........................................................ 13,100 7,000
Other accrued liabilities............................................................ 23,000 8,000
--------------- ------------
Total current liabilities.................................................. 100,600 61,100
Long term debt............................................................................ 300 200
Other liabilities......................................................................... 4,700 1,500
--------------- ------------
Total liabilities.......................................................... 105,600 62,800
--------------- ------------
Net assets acquired and liabilities assumed...............................................$ 1,907,400 $ 334,600
=============== ============
The accompanying notes to the combined financial statements are an integral part of these statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SNAPPLE BEVERAGE BUSINESS OF
THE QUAKER OATS COMPANY
COMBINED STATEMENTS OF CERTAIN REVENUES AND OPERATING EXPENSES
THREE MONTHS ENDED
MARCH 31,
------------------------
1996 1997
---- ----
(IN THOUSANDS)
(UNAUDITED)
<S> <C> <C>
Net sales...........................................................................$ 122,700 $ 96,600
Cost of goods sold.................................................................. 79,900 58,800
----------- ----------------
Gross profit.................................................................. 42,800 37,800
----------- ----------------
Advertising and merchandising....................................................... 27,400 25,300
Marketing and selling............................................................... 8,700 8,800
Amortization of intangibles......................................................... 13,500 13,400
Other general and administrative expenses........................................... 10,700 10,400
----------- ----------------
Selling, general and administrative expenses.................................. 60,300 57,900
Loss on assets held for sale........................................................ -- 1,404,000
----------- ----------------
Loss before interest and income taxes...............................................$ (17,500) $ (1,424,100)
=========== ================
The accompanying notes to the combined financial statements are an integral partof these statements.
</TABLE>
<PAGE>
SNAPPLE BEVERAGE BUSINESS OF
THE QUAKER OATS COMPANY
NOTES TO THE COMBINED FINANCIAL STATEMENTS
(UNAUDITED)
(1) PRINCIPLES OF COMBINATION
The financial statements include certain assets and liabilities and the
operations of the Snapple Beverage Business (Snapple Business). The Snapple
Business is engaged in the production, marketing and distribution of beverages
under the Snapple trademark and related trademarks and trade names through
Snapple Beverage Corp. (Snapple) and its subsidiaries, as well as through The
Quaker Oats Company (Quaker), a New Jersey corporation, and certain affiliates
of Quaker. Snapple, a Delaware corporation, is a wholly-owned subsidiary of
Quaker. Refer to Note 2, "Basis of Presentation," for further discussion
regarding the presentation of the financial statements. The Snapple Business has
U.S. and international operations. All significant intercompany transactions
have been eliminated.
On May 22, 1997, Quaker completed the sale of 100 percent of the shares of
Snapple to Triarc Companies, Inc. (Triarc), a Delaware corporation located in
New York, New York, for $300 million, subject to certain adjustments. In
addition, certain other assets and liabilities related to the Snapple Business
were transferred to Triarc or its affiliates.
(2) BASIS OF PRESENTATION
The combined financial statements have been prepared pursuant to the terms
of the Stock Purchase Agreement (Agreement) between Quaker and Triarc. The
combined statements of assets acquired and liabilities assumed as March 31, 1996
and 1997, and the combined statements of certain revenues and operating expenses
for the three months ended March 31, 1996 and 1997, have been prepared by Quaker
without audit. In the opinion of management, these financial statements include
all adjustments necessary to present fairly the combined statements of assets
acquired and liabilities assumed and the combined statements of certain revenues
and operating expenses as of March 31, 1996 and 1997. All adjustments made have
been of a normal recurring nature. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with Generally
Accepted Accounting Principles (GAAP) have been condensed or omitted. Quaker
believes that the disclosures included are adequate and provide a fair
presentation of interim period results. Interim financial statements are not
indicative of financial position or operating results for an entire year. It is
suggested that these interim financial statements be read in conjunction with
the audited Combined Statement of Assets Acquired and Liabilities Assumed of the
Snapple Business as of December 31, 1996, and audited Combined Statements of
Certain Revenues and Operating Expenses of the Snapple Business for the
eleven-month and six-day period ended December 6, 1994, the twenty-five day
period ended December 31, 1994, and the twelve months ended December 31, 1995
and 1996, and the notes thereto.
The Snapple Business was not separately accounted for as a business segment
of Quaker as it was operated as a product line of Quaker's beverages business.
Line of business reporting for the Snapple Business prepared for managerial
purposes contained allocations of the expenses of Quaker's beverages business
including supply chain (procurement, production and quality control), human
resource, finance and accounting functions. In addition, certain other expenses
were allocated to the Snapple Business including certain research and
development, information services, human resource, finance, legal and
administrative functions that were performed on a company-wide basis for the
benefit of all operating businesses of Quaker, including the beverages business.
Separate specific balance sheet accounts were not maintained for items
including, but not limited to, accounts payable, employee-related liabilities,
taxes or financing. As a result, the distinct and separate accounts necessary to
present complete separate financial statements of the Snapple Business have not
been maintained by Quaker since Snapple was acquired.
<PAGE>
SNAPPLE BEVERAGE BUSINESS OF
THE QUAKER OATS COMPANY
NOTES TO THE COMBINED FINANCIAL STATEMENTS
(UNAUDITED)
As a result of the relationship between Snapple and Quaker, the financial
position and results of operations are not indicative of the results of the
Snapple Business had it been a stand-alone entity. Additionally, these financial
statements are not indicative of the future financial position or results of
operations of the Snapple Business.
COMBINED STATEMENTS OF ASSETS ACQUIRED AND LIABILITIES ASSUMED
The Combined Statements of Assets Acquired and Liabilities Assumed consist
of the assets and liabilities which were acquired by, or assumed by Triarc.
Deferred tax assets and liabilities are excluded from the Combined Statements of
Assets Acquired and Liabilities Assumed.
Certain assets and liabilities related to the Snapple Business were
retained by Quaker, including, among other things, a manufacturing facility and
income tax liabilities pertaining to periods prior to the acquisition of the
Snapple Business by Triarc.
COMBINED STATEMENTS OF CERTAIN REVENUES AND OPERATING EXPENSES
The Combined Statements of Certain Revenues and Operating Expenses reflect
the sales and substantially all of the costs of operating the Snapple Business
in the normal and ordinary course. These costs include direct expenses and
certain shared expenses incurred by Quaker on behalf of the Snapple Business.
Management believes that the methods of allocating shared expenses to the
Snapple Business are reasonable and approximate the costs of actual services
provided. Interest and income taxes are excluded.
(3) ESTIMATES AND ASSUMPTIONS
The preparation of the financial statements in conformity with GAAP
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosures of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results may differ
from these estimates.
(4) LOSS ON ASSETS HELD FOR SALE
On March 27, 1997, Quaker entered into an agreement to sell the Snapple
Business to Triarc. Under the provisions of Financial Accounting Standards Board
(FASB) Statement No.121, "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to Be Disposed Of," the Snapple Business was then
considered an asset held for sale and, as such, the carrying value of Quaker's
basis in the Snapple Business was reduced to fair market value. The fair market
value used in determining the impairment loss was based on the sale price of
$300 million. Accordingly, a pretax impairment loss of $1.4 billion was recorded
and a valuation reserve for the write-down of the excess carrying value over
fair market value was established ($1.5 billion for the writedown of intangibles
offset by $100 million in related deferred tax liabilities) in the first quarter
of 1997.
<PAGE>
SNAPPLE BEVERAGE BUSINESS OF
THE QUAKER OATS COMPANY
NOTES TO THE COMBINED FINANCIAL STATEMENTS
(UNAUDITED)
(5) INTANGIBLES
Intangible assets consist of goodwill, trademarks, proprietary formulas and
distribution network/rights. Intangible assets are amortized on a straight-line
basis. The balances of intangible assets at March 31, 1996, are as follows (in
thousands):
<TABLE>
<CAPTION>
LESS INTANGIBLE
INTANGIBLE ACCUMULATED ASSETS-
ASSETS AMORTIZATION NET
------ ------------ ---
<S> <C> <C> <C>
Goodwill...................................................$ 1,333,800 $ 47,300 $ 1,286,500
Trademark-Snapple.......................................... 440,000 14,500 425,500
Trademark - Made From The Best
Stuff on Earth.......................................... 6,000 1,100 4,900
Proprietary formulas....................................... 75,200 6,800 68,400
Distribution network/rights................................ 45,900 2,400 43,500
-------------- ------------ ----------------
Intangible assets..........................................$ 1,900,900 $ 72,100 $ 1,828,800
============== ============ ================
The balances of intangible assets at March 31, 1997, including the
valuation reserve related to the impairment loss as discussed in Note 4, are as
follows (in thousands):
LESS LESS INTANGIBLE
INTANGIBLE ACCUMULATED VALUATION ASSETS-
ASSETS AMORTIZATION RESERVE NET
------ ------------ ------- ---
Goodwill.............................................$ 1,335,000 $ 81,300 $ 1,253,700 $ --
Trademark-Snapple.................................... 440,000 25,500 250,400 164,100
Trademark - Made From The Best
Stuff on Earth.................................... 6,000 2,000 -- 4,000
Proprietary formulas................................. 75,200 11,800 -- 63,400
Distribution network/rights.......................... 45,700 4,500 -- 41,200
-------------- ------------ -------------- -------------
Intangible assets....................................$ 1,901,900 $ 125,100 $ 1,504,100 $ 272,700
============== ============ ============== =============
</TABLE>
(6) SELECTED CASH FLOW INFORMATION
Due to the relationship between the Snapple Business and Quaker and the
basis of presentation of the financial statements contained herein (Refer to
Note 2, "Basis of Presentation"), the selected cash flow information presented
below is not indicative of what the cash flows of the Snapple Business would
have been if it had been a stand-alone entity or indicative of future cash flows
of the Snapple Business (in thousands).
THREE MONTHS ENDED
-----------------------
MARCH 31, MARCH 31,
1996 1997
---- ----
Cash used in operating activities (a)..........$ (17,000) $ (16,500)
Cash used in investing activities (b).......... (2,500) (1,200)
Cash provided by financing activities (c)...... 20,400 18,000
----------- ----------
Net increase in cash and cash equivalents......$ 900 $ 300
=========== ==========
<PAGE>
SNAPPLE BEVERAGE BUSINESS OF
THE QUAKER OATS COMPANY
NOTES TO THE COMBINED FINANCIAL STATEMENTS
(UNAUDITED)
(a) Operating Activities- Cash used in operating activities for the three
months ended March 31, 1997, was primarily comprised of the net loss
before interest and income taxes, adjusted for depreciation,
amortization and the loss on assets held for sale, and increases in
inventories and trade accounts receivable of approximately $12 million
and $6 million, respectively, and a decrease in accrued liabilities of
approximately $8 million, partly offset by an increase in accounts
payable of approximately $9 million.
Cash used in operating activities for the three months ended March 31,
1996, was primarily comprised of the net loss before interest and
income taxes, adjusted for depreciation and amortization, and increases
in inventories and trade accounts receivable of approximately $15
million and $16 million, respectively, partly offset by an increase in
accounts payable of approximately $15 million.
(b) Investing Activities- The principal component of cash used in investing
activities is capital expenditures related to machinery and equipment
included in the Combined Statements of Assets Acquired and Liabilities
Assumed as of March 31, 1996 and 1997.
(c) Financing Activities- Cash advances made by Quaker to cover operating
expenses and capital requirements of the Snapple Business are the
principal component of cash provided by financing activities.
(7) LITIGATION AND CLAIMS
The Snapple Business is a party to a number of lawsuits and claims, which
have been vigorously defended. Such matters arise out of the normal course of
business and other issues. Certain of these actions seek damages in large
amounts. While the results of litigation cannot be predicted with certainty, it
is believed that the final outcome of such litigation will not have a material
adverse effect on the consolidated financial position or results of operations
of the Snapple Business. Changes in assumptions, as well as actual experience,
could cause these estimates to change.
<PAGE>
(b) Pro Forma Financial Information
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited pro forma condensed consolidated balance sheet of
Triarc Companies, Inc. and subsidiaries (the "Company") as of March 30, 1997 and
condensed consolidated statements of operations of the Company for the year
ended December 31, 1996 and for the three months ended March 30, 1997 have been
prepared by adjusting such financial statements, as derived and condensed, as
applicable, from (i) the consolidated financial statements in its Form 10-K for
the year ended December 31, 1996 (the "Form 10-K") audited by Deloitte & Touche
LLP and (ii) the unaudited condensed consolidated financial statements in its
Form 10-Q for the three months ended March 30, 1997 (the "Form 10-Q"), to
reflect first, the sale (the "RTM Sale") of the Company's restaurants to RTM
Restaurant Group ("RTM") on May 5, 1997 as previously reported in a Form 8-K
filed on May 20, 1997 and amended in a Form 8-K/A filed on August 4, 1997 and
the sale (the "C&C Sale" and, collectively with the RTM Sale, the "Sales") of
the Company's rights to the C&C beverage line, including the C&C trademark, on
July 18, 1997 as previously reported in a Form 8-K filed on August 4, 1997 and
second, the acquisition of Snapple and related transactions (the "Acquisition")
on May 22, 1997. The combined statement of assets acquired and liabilities
assumed of Snapple as of March 31, 1997 and combined statements of certain
revenues and operating expenses of Snapple for the year ended December 31, 1996
and for the three months ended March 31, 1997 included in the pro forma
condensed consolidated financial statements have been derived and condensed, as
applicable, from (i) the combined financial statements for the year ended
December 31, 1996 audited by Arthur Andersen LLP and (ii) the unaudited combined
financial statements for the three months ended March 31, 1997, both included
elsewhere herein. The pro forma adjustments for the allocation of the purchase
price of Snapple on the pro forma condensed consolidated balance sheet and the
effect thereof on pro forma adjustments to the pro forma condensed consolidated
statements of operations are based on preliminary estimates and are subject to
finalization. The pro forma condensed financial statements have been prepared as
if all of the above transactions had occurred as of March 30, 1997 for the pro
forma condensed consolidated balance sheet and as of January 1, 1996 for the pro
forma condensed consolidated statements of operations. Such pro forma
adjustments are described in the accompanying notes to the pro forma condensed
consolidated balance sheet and statements of operations which should be read in
conjunction with such statements. Such pro forma condensed consolidated
financial statements should also be read in conjunction with the Company's
audited consolidated financial statements appearing in the Form 10-K, the
Company's unaudited condensed consolidated financial statements appearing in the
Form 10-Q and the audited combined and unaudited combined financial statements
of Snapple for the year ended December 31, 1996 and the three months ended March
31, 1997 appearing elsewhere herein. The pro forma condensed consolidated
financial statements do not purport to be indicative of the actual financial
position or results of operations of the Company had such transactions actually
been consummated on March 30, 1997 and January 1, 1996, respectively, or of the
future financial position or results of operations of the Company.
<PAGE>
<TABLE>
<CAPTION>
TRIARC COMPANIES, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
MARCH 30, 1997
ADJUSTMENTS PRO FORMA ADJUSTMENTS
AS FOR THE FOR THE FOR THE
REPORTED SALES SALES SNAPPLE ACQUISITION PRO FORMA
-------- ----- ----- ------- ----------- ---------
(IN THOUSANDS)
(UNAUDITED)
ASSETS
<S> <C> <C> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents.........$ 120,516 $ 50 (i) $ 117,120 $ 4,700 $ 330,000 (a) $ 51,075
(4,196) (ii) (67,950) (b)
750 (v) (321,100) (c)
(11,200) (d)
(495) (e)
Short-term investments............ 58,460 -- 58,460 -- -- 58,460
Receivables, net.................. 85,088 2,977 (iii) 88,768 26,600 -- 115,368
703 (v)
Inventories....................... 55,914 (2,592) (iii) 53,322 37,000 4,801 (f) 95,123
Assets held for sale ............. 71,116 (71,116) (i) -- -- -- --
Deferred income tax benefit....... 16,409 -- 16,409 -- 804 (e) 36,314
19,101 (f)
Prepaid expenses and other
current assets.................. 14,691 -- 14,691 16,200 -- 30,891
----------- ----------- ------------ ----------- ------------ -------------
Total current assets........... 422,194 (73,424) 348,770 84,500 (46,039) 387,231
Investment in Snapple................ -- -- -- -- 321,100 (c) --
(321,100) (f)
Properties, net..................... 105,995 (2) (v) 105,993 24,600 (7,927) (f) 122,666
Unamortized costs in excess
of net assets of acquired
companies........................ 202,026 -- 202,026 -- 102,257 (f) 304,283
Trademarks.......................... 56,187 (1,575) (v) 54,612 272,700 (62,700) (f) 264,612
Deferred costs, deposits and
other assets..................... 58,155 1,329 (i) 61,449 15,600 11,200 (d) 98,513
(385) (iii) 12,150 (f)
(2,950) (iv) (1,886) (e)
5,300 (v)
------------ ----------- ------------ ----------- ------------ -------------
$ 844,557 $ (71,707) $ 772,850 $ 397,400 $ 7,055 $ 1,177,305
============ =========== ============ =========== ============ =============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TRIARC COMPANIES, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET (CONTINUED)
MARCH 30, 1997
ADJUSTMENTS PRO FORMA ADJUSTMENTS
AS FOR THE FOR THE FOR THE
REPORTED SALES SALES SNAPPLE ACQUISITION PRO FORMA
-------- ----- ----- ------- ----------- ---------
(IN THOUSANDS)
(UNAUDITED)
LIABILITIES AND
STOCKHOLDERS' EQUITY
<S> <C> <C> <C> <C> <C> <C>
Current liabilities:
Current portion of long-term
debt.............................$ 101,006 $ (69,517) (i) $ 31,489 $ -- $ 7,000 (a) $ 15,539
(22,950) (b)
Accounts payable.................... 42,949 -- 42,949 19,600 -- 62,549
Accrued expenses and other
current liabilities.............. 110,162 (220) (i) 105,453 41,500 17,229 (f) 164,182
(4,196) (ii)
(1,150) (iv)
681 (v)
176 (v)
---------- ---------- ------------ ---------- ---------- -----------
Total current liabilities....... 254,117 (74,226) 179,891 61,100 1,279 242,270
Long-term debt........................ 487,612 -- 487,612 200 323,000 (a) 765,812
(45,000) (b)
Deferred income taxes................. 34,464 -- 34,464 -- 42,131 (f) 76,595
Deferred income and
other liabilities.................. 28,280 4,015 (v) 32,295 1,500 (315) (e) 55,302
21,822 (f)
Minority interests.................... 34,316 -- 34,316 -- -- 34,316
Stockholders' equity (deficit):
Common stock........................ 3,398 -- 3,398 -- -- 3,398
Additional paid-in capital.......... 163,416 -- 163,416 -- -- 163,416
Accumulated deficit................. (113,001) (1,800) (iv) (114,497) -- (1,262) (e) (115,759)
304 (v)
Treasury stock...................... (45,760) -- (45,760) -- -- (45,760)
Other............................... (2,285) -- (2,285) -- -- (2,285)
Net assets of Snapple............... -- -- -- 334,600 (334,600) (f) --
------------ ----------- ------------- ----------- ------------ -----------
Total stockholders' equity...... 5,768 (1,496) 4,272 334,600 (335,862) 3,010
------------ ----------- ------------- ----------- ------------ ------------
$ 844,557 $ (71,707) $ 772,850 $ 397,400 $ 7,055 $ 1,177,305
============ =========== ============= =========== ============ = ============
</TABLE>
<PAGE>
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET (CONTINUED)
RTM Sale Pro Forma Adjustments
(i) To reflect the RTM Sale consisting of restaurants sold to RTM for (i)
the proceeds of $50,000 in cash, a $1,950,000 note due 2000 with a
discounted value of $1,329,000 and the assumption by RTM of
$54,642,000 of mortgage and equipment notes and $14,875,000 of
capitalized lease obligations, (ii) the elimination of the assets held
for sale of $71,116,000 and (iii) the recording of the $220,000 net
difference against amounts previously accrued.
(ii) To reflect the payment of $3,252,000 of previously accrued transaction
costs, including real estate transfer taxes, mortgage recording costs,
fairness opinions and valuations, legal and accounting, and the
payment to RTM of $944,000 of reserves for employee benefits.
(iii) To reflect a receivable from RTM for the value of inventories of
$2,592,000 and restaurant lease and utility deposits of $385,000
transferred to RTM with settlement due within 30 days.
(iv) To reflect the write-off of previously unamortized deferred financing
costs of $2,950,000, less related tax benefit of $1,150,000 relating
to the debt assumed by RTM.
C & C Sale Pro Forma Adjustments
(v) To reflect the C&C Sale consisting of 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 "Note") with a discounted value of $6,003,000
consisting of $4,373,000 relating to the C&C Sale and $2,380,000
relating to future revenues. The Note is classified $703,000 as
current receivables and $5,300,000 as non-current deferred costs,
deposits and other assets. 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. Such deferred revenues are
classified $231,000 as current accrued expenses and $2,149,000 as
non-current deferred income and other liabilities. 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 pretax
gain of $2,796,000 which is being recognized pro-rata between the gain
on sale and the carrying value of the assets sold based on the cash
proceeds and collections under the Note since realization of the Note
is not yet fully assured. As such, $480,000 of such pretax gain has
been recognized currently which, less taxes of $176,000 at the
incremental income tax rate of 36.6%, results in a net gain of
$304,000. The remaining $2,316,000 has been deferred, of which
$450,000 is classified as current accrued expenses and $1,866,000 is
classified as non-current deferred income and other liabilities.
Snapple Acquisition Pro Forma Adjustments
(a) To reflect the borrowing, on the date of the Acquisition, by Snapple
and Mistic Brands, Inc. ("Mistic"), a subsidiary of the Company, of
$330,000,000 under a $380,000,000 credit agreement (the "Credit
Agreement") entered into by Snapple, Mistic and Triarc Beverage
Holdings Corp., a subsidiary of the Company and the parent of Snapple
and Mistic.
(b) To reflect the repayment of all outstanding borrowings under Mistic's
former bank facility. (c) To reflect the Company's investment in
Snapple of $321,100,000 of purchase price (including certain
post-closing adjustments and subject to additional post-closing
adjustments) including $10,300,000 of estimated fees and expenses.
<PAGE>
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET (CONTINUED)
(d) To reflect the payment of estimated deferred financing costs of
$11,200,000 associated with the Credit Agreement.
(e) To record the additional effects of the repayment of Mistic's debt
(see (b) above) comprised of (i) the write-off of unamortized deferred
financing costs of $1,886,000, (ii) the repurchase of stock
appreciation rights held by a lender under the refinanced debt
($492,000 paid in satisfaction of a recorded estimated liability of
$315,000), (iii) $3,000 of related legal fees and (iv) the tax benefit
of the above of $804,000.
(f) To record the allocation of the purchase price of Snapple, on a
preliminary basis subject to finalization, as follows (in thousands):
<TABLE>
<CAPTION>
DEBIT
(CREDIT)
--------
<S> <C>
Adjust "Inventories" to fair value .................................................................$ 4,801
Adjust "Properties, net" to (i) to eliminate refrigerated display cases to conform
accounting to the Company's policy of expensing when purchased
and placed in service ($7,812) and (ii) write off other acquired
properties which the Company
plans to abandon ($115) ....................................................................... (7,927)
Adjust "Trademarks" to reduce the fair value of the trademarks and tradenames,
formulas and distribution network of Snapple in accordance with an independent
appraisal .................................................................................... (62,700)
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
($13,346) and (ii) eliminate Snapple's investment in its own distribution routes
($1,196) ...................................................................................... 12,150
Adjust accrued expenses and other current liabilities 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 ($5,144), (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 and marketing programs committed to prior to the
Acquisition ($2,386) and (iv) an estimate of other liabilities to be identified the
Company in the finalization of the purchase accounting allocation in connection with
the Acquisition ($5,900)....................................................................... (17,229)
Adjust "Deferred income and 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 ....................................................................................... (21,822)
Establish deferred income taxes relating to Snapple and the purchase accounting
adjustments herein consisting of a current asset ($19,101) and a noncurrent liability
($42,131)...................................................................................... (23,030)
Eliminate the net assets of Snapple................................................................. 334,600
Eliminate the Company's investment in Snapple included as a component of
"Stockholders' equity (deficit)".............................................................. (321,100)
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").................................................................................... 102,257
------------
$ --
============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TRIARC COMPANIES, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
ADJUSTMENTS PRO FORMA ADJUSTMENTS
AS FOR THE FOR THE FOR THE
REPORTED SALES SALES SNAPPLE ACQUISITION PRO FORMA
-------- ----- ----- ------- ----------- ---------
(IN THOUSANDS EXCEPT PER SHARE DATA)
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Net sales........................$ 931,920 $ (228,031) (i) $ 692,726 $ 550,800 $ -- $ 1,243,526
444 (v)
(11,607) (vi)
Royalties, franchise fees
and other revenues............. 57,329 9,121 (ii) 66,510 -- -- 66,510
60 (v)
989,249 (230,013) 759,236 550,800 -- 1,310,036
------------ ----------- ---------- -------------- ------------ -------------
Costs and expenses:
Cost of sales.................... 652,109 (187,535) (i) 454,454 352,900 -- 807,354
178 (v)
(10,298) (vi)
Advertising, selling and
distribution................... 139,662 (24,764) (i) 113,196 188,400 (6,826) (a) 294,770
(1,702) (vi)
General and administrative....... 131,357 (9,913) (i) 121,010 93,900 (44,929) (b) 169,981
(434) (vi)
Reduction in carrying value
of long-lived assets
impaired or to be
disposed of.................... 64,300 (58,900) (i) 5,400 -- -- 5,400
Facilities relocation and
corporate restructuring........ 8,800 (2,400) (i) 6,400 16,600 -- 23,000
------------ ----------- ---------- -------------- ------------ -------------
996,228 (295,768) 700,460 651,800 (51,755) 1,300,505
------------ ----------- ---------- -------------- ------------ -------------
Operating profit (loss)........ (6,979) 65,755 58,776 (101,000) 51,755 9,531
Interest expense..................... (73,379) 8,421 (iii) (65,231) -- (28,274) (d) (93,505)
(273) (v)
Gain on sale of businesses, net...... 77,000 -- 77,000 -- -- 77,000
Other income, net.................... 7,996 16 (vi) 8,695 -- -- 8,695
683 (vii)
Income (loss) before income
taxes and minority
interests..................... 4,638 74,602 79,240 (101,000) 23,481 1,721
Provision for income taxes............ (11,294) (28,406) (iv) (40,278) -- 28,957 (e) (11,321)
(578) (viii)
Minority interests in income
of consolidated subsidiaries....... (1,829) -- (1,829) -- -- (1,829)
------------ ----------- ---------- -------------- ------------ -------------
Income (loss) before
extraordinary items.........$ (8,485) $ 45,618 $ 37,133 $ (101,000) $ 52,438 $ (11,429)
============ =========== ========== ============== ============ ==============
Income (loss) before
extraordinary items
per share...................$ (.28) $ 1.24 $ (0.38)
============ ========== =============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TRIARC COMPANIES, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 30, 1997
ADJUSTMENTS PRO FORMA ADJUSTMENTS
AS FOR THE FOR THE FOR THE
REPORTED SALES SALES SNAPPLE ACQUISITION PRO FORMA
-------- ----- ----- ------- ----------- ---------
(IN THOUSANDS EXCEPT PER SHARE DATA)
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Net sales........................$ 192,086 $ (52,134) (i) $ 136,832 $ 96,600 $ -- $ 233,432
111 (v)
(3,231)(vi)
Royalties, franchise fees
and other revenues............. 13,315 2,085 (ii) 15,415 -- -- 15,415
15 (v)
205,401 (53,154) 152,247 96,600 -- 248,847
------------ ----------- ---------- -------------- -------------- ------------
Costs and expenses:
Cost of sales.................... 125,883 (40,962) (i) 82,081 58,800 -- 140,881
44 (v)
(2,884) (vi)
Advertising, selling and
distribution................... 29,345 (5,597) (i) 23,533 34,100 (2,068)(a) 55,565
(215) (vi)
General and administrative....... 30,714 (2,366) (i) 28,231 23,800 (11,083)(b) 40,948
(117) (vi)
Facilities relocation and
corporate restructuring 1,883 (1,706) (i) 177 -- -- 177
Loss on assets held for sale..... -- -- -- 1,404,000 (1,404,000)(c) --
------------ ----------- ---------- -------------- -------------- -----------
187,825 (53,803) 134,022 1,520,700 (1,417,151) 237,571
------------ ----------- ---------- -------------- -------------- ------------
Operating profit (loss)........ 17,576 649 18,225 (1,424,100) 1,417,151 11,276
Interest expense..................... (15,702) 2,020 (iii) (13,752) -- (6,914)(d) (20,666)
(70) (v)
Other income, net.............. 4,111 33 (vi) 4,323 -- -- 4,323
179 (vii)
Income (loss) before income
taxes and minority
interests................... 5,985 2,811 8,796 (1,424,100) 1,410,237 (5,067)
Benefit from (provision for)
income taxes....................... (3,052) (1,012) (iv) (4,141) -- 5,088 (e) 947
(77) (viii)
Minority interests in income
of consolidated subsidiaries....... (4,110) -- (4,110) -- -- (4,110)
------------ ----------- ---------- -------------- -------------- ------------
Income (loss) before
extraordinary items.........$ (1,177) $ 1,722 $ 545 $ (1,424,100) $ 1,415,325 $ (8,230)
============ =========== ========== ============== ============== =============
Income (loss) before
extraordinary items
per share...................$ (.04) $ 0.02 $ (0.28)
============ ========== ============
</TABLE>
<PAGE>
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (CONTINUED) RTM
Sale Pro Forma Adjustments (i) 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 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 have 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 attributable to the restaurants. Since the Company no longer owns Arby's
restaurants but continues to operate as an Arby's franchisor, it is undertaking
a reorganization of its restaurant segment eliminating approximately 60
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 three months ended March 30, 1997
principally due to two 1996 eliminations which did not recur in the 1997 period
for (i) the $58,900,000 reduction in carrying value of long-lived assets
associated with the restaurants sold and (ii) depreciation and amortization on
the long-lived restaurant assets sold, which had been written down to their
estimated fair values as of December 31, 1996 and were no longer depreciated or
amortized while they were held for sale.
(ii) To reflect royalties on the sales of the sold restaurants at the rate
of 4%.
(iii)To reflect a reduction to interest expense relating to the debt
assumed by RTM.
(iv) To reflect the income tax effects of the above at the incremental
income tax rate of 38.9%.
C&C Sale Pro Forma Adjustments
(v) To reflect (i) realization of deferred revenues based on the portion
of the minimum take or pay commitment for sales of concentrate for C&C
products to Kelco to be fulfilled and fees related to the technical
services to be performed, both under the contract with Kelco, (ii)
amortization of the discount on the deferred revenues and (iii)
recognition of the estimated cost of the concentrate to be sold.
(vi) To reflect the elimination of sales, cost of sales, advertising,
selling and distribution expenses, general and administrative expenses
and other expense related to the C&C beverage line.
(vii) To reflect amortization of the discount on the Note.
(viii) To reflect the income tax effects of the above at the incremental
income tax rate of 36.6%.
<PAGE>
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (CONTINUED)
<TABLE>
<CAPTION>
Snapple Acquisition Pro Forma Adjustments
(a) Represents adjustments to "Advertising, selling and distribution" expenses as follows (in thousands):
YEAR ENDED THREE MONTHS ENDED
DECEMBER 31, 1996 MARCH 30, 1997
----------------- --------------
<S> <C> <C>
Record (reverse) net purchases (depreciation) of
refrigerated display cases expensed when
purchased and placed in service................................$ 3,174 $ (568)
Reverse reported take-or-pay expense for obligations
associated with long-term production contracts
as a result of adjustment to fair value........................ (10,000) (1,500)
------------ -------------
$ (6,826) $ (2,068)
============ =============
(b) Represents adjustments to "General and administrative" expenses as follows (in thousands):
YEAR ENDED THREE MONTHS ENDED
DECEMBER 31, 1996 MARCH 30, 1997
----------------- --------------
Record amortization of trademarks and tradenames
over an estimated life of 35 years.............................$ 6,000 $ 1,500
Record amortization of Goodwill over an estimated
life of 35 years............................................... 2,922 730
Reverse reported amortization of intangibles....................... (54,200) (13,400)
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............................. 349 87
------------ -------------
$ (44,929) $ (11,083)
============ =============
(c) To reverse the historical loss on sale of assets for the three months
ended March 30, 1997 related to the reduction of the carrying value of
the Snapple Business in connection with its sale to Triarc.
(d) Represents adjustments to "Interest expense" as follows (in thousands):
YEAR ENDED THREE MONTHS ENDED
DECEMBER 31, 1996 MARCH 30, 1997
----------------- --------------
Record interest expense at weighted average rate of
10.2% on $330,000,000 of borrowings associated
with the Credit Agreement......................................$ (33,424) $ (8,030)
Record amortization on $11,200,000 of deferred financing
costs associated with the Credit Agreement..................... (1,889) (472)
Reverse reported interest expense on Mistic's former
bank facility.................................................. 6,086 1,393
Reverse reported amortization of deferred financing costs
associated with Mistic's former bank facility.................. 953 195
------------- -------------
$ (28,274) $ (6,914)
============== ==============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (CONTINUED)
(e) Represents adjustments to "Benefit from (provision for) income taxes" (in thousands):
YEAR ENDED THREE MONTHS ENDED
DECEMBER 31, 1996 MARCH 30, 1997
----------------- -------------------
<S> <C> <C>
To reflect an income tax benefit on the adjusted
historical pretax 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 $ 63,024
To reflect the estimated income tax effect of the
above adjustments (exclusive of nondeductible
Goodwill write-off and/or amortization) at 39%................. 2,671 (57,936)
------------- -------------
$ 28,957 $ 5,088
============= =============
</TABLE>
(f) 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 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 Oats Company corporate facility
to 12,500 square feet at the Triarc Beverage Group 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 to eliminate such losses.
<PAGE>
(c) Exhibits
None
<PAGE>
SIGNATURE
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 hereunto duly authorized.
TRIARC COMPANIES, INC.
(Registrant)
Date: August 5, 1997 By: /s/ JOHN L. BARNES, JR.
-----------------------
John L. Barnes, Jr.
Senior Vice President
and Chief Financial Officer
<PAGE>
