SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED JUNE 30, 1994 COMMISSION FILE NUMBER 33-63044
VALCOR, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 74-2678674
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
5430 LBJ FREEWAY, SUITE 1700, DALLAS, TEXAS 75240-2697
(Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (214) 233-1700
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 AND (2) HAS BEEN SUBJECT TO SUCH FILING REQUIREMENTS FOR
THE PAST 90 DAYS. YES X NO
THE REGISTRANT IS A WHOLLY-OWNED SUBSIDIARY OF VALHI, INC. (FILE NO. 1-5467) AND
MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTIONS H(1)(A) AND (B) OF FORM
10-Q FOR REDUCED DISCLOSURE FORMAT.
VALCOR, INC.
INDEX
PAGE
NUMBER
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
Consolidated Balance Sheets - December 31, 1993
and June 30, 1994 3-4
Consolidated Statements of Income - Three months
and six months ended June 30, 1993 and 1994 5
Consolidated Statement of Stockholder's Equity -
Six months ended June 30, 1994 6
Consolidated Statements of Cash Flows - Six
months ended June 30, 1993 and 1994 7-8
Notes to Consolidated Financial Statements 9-12
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations. 13-16
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K. 17
VALCOR, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
ASSETS December 31, June 30,
1993 1994
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 10,363 $ 15,626
Accounts and notes receivable 25,137 31,031
Receivable from affiliates 313 33
Inventories 28,600 26,691
Prepaid expenses 5,241 3,695
Deferred income taxes 904 1,942
Total current assets 70,558 79,018
Other assets:
Timber and timberlands 51,868 53,611
Intangible assets 21,080 20,081
Other 12,123 13,897
Total other assets 85,071 87,589
Property and equipment:
Land 15,989 17,806
Buildings 33,286 34,219
Equipment 136,252 145,808
Construction in progress 16,009 26,157
201,536 223,990
Less accumulated depreciation 84,688 90,831
Net property and equipment 116,848 133,159
$272,477 $299,766
</TABLE>
VALCOR, INC.
CONSOLIDATED BALANCE SHEETS (CONTINUED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDER'S EQUITY December 31, June 30,
1993 1994
<S> <C> <C>
Current liabilities:
Current maturities of long-term debt $ 9,086 $ 15,812
Accounts payable 14,673 16,490
Accrued liabilities 19,279 22,814
Payable to affiliates 975 1,326
Income taxes 2,697 1,425
Total current liabilities 46,710 57,867
Noncurrent liabilities:
Long-term debt 185,690 189,209
Deferred income taxes 21,987 23,798
Other 4,239 3,604
Total noncurrent liabilities 211,916 216,611
Stockholder's equity:
Common stock 1 1
Additional paid-in capital 520 520
Retained earnings 13,095 24,868
Currency translation adjustment 235 (101)
Total stockholder's equity 13,851 25,288
$272,477 $299,766
</TABLE>
[FN]
Commitments and contingencies (Note 9)
VALCOR, INC.
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS)
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
1993 1994 1993 1994
<S> <C> <C> <C> <C>
Revenues and other income:
Net sales $87,134 $98,454 $167,262 $183,200
Business unit disposition - - 500 -
Other, net 789 698 1,689 1,341
87,923 99,152 169,451 184,541
Costs and expenses:
Cost of sales 68,759 74,690 133,900 142,291
Selling, general and administrative 5,735 5,553 11,291 11,513
Interest 910 4,357 1,862 8,645
75,404 84,600 147,053 162,449
Income before income taxes 12,519 14,552 22,398 22,092
Provision for income taxes 4,839 5,483 8,585 8,772
Net income $ 7,680 $ 9,069 $ 13,813 $ 13,320
</TABLE>
VALCOR, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY
SIX MONTHS ENDED JUNE 30, 1994
(IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONAL CURRENCY TOTAL
COMMON PAID-IN RETAINED TRANSLATION STOCKHOLDER'S
STOCK CAPITAL EARNINGS ADJUSTMENT EQUITY
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1993 $1 $520 $13,095 $ 235 $13,851
Net income - - 13,320 - 13,320
Cash dividends - - (1,547) - (1,547)
Currency translation adjustment, net - - - (336) (336)
Balance at June 30, 1994 $1 $520 $24,868 $(101) $25,288
</TABLE>
VALCOR, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1993 AND 1994
(IN THOUSANDS)
<TABLE>
<CAPTION>
1993 1994
<S> <C> <C>
Cash flows from operating activities:
Net income $ 13,813 $ 13,320
Adjustments:
Depreciation, depletion and amortization 7,874 8,294
Deferred income taxes 736 871
Other, net (236) 198
Change in assets and liabilities:
Accounts and notes receivable (183) (5,917)
Inventories 4,103 1,909
Accounts payable and accrued liabilities (305) 5,349
Accounts with affiliates (2,720) 631
Other, net 582 (1,755)
Total adjustments 9,851 9,580
Net cash provided by operating activities 23,664 22,900
Cash flows from investing activities:
Capital expenditures (9,195) (25,901)
Other, net 644 (141)
Net cash used by investing activities (8,551) (26,042)
Cash flows from financing activities:
Long-term debt:
Additions 32,983 45,518
Principal payments (39,058) (35,272)
Dividends paid to Valhi (11,445) (1,547)
Repayment of loans from Valhi (2,000) -
Other, net 264 -
Net cash provided (used) by financing activities (19,256) 8,699
</TABLE>
VALCOR, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
SIX MONTHS ENDED JUNE 30, 1993 AND 1994
(IN THOUSANDS)
<TABLE>
<CAPTION>
1993 1994
<S> <C> <C>
Cash and cash equivalents:
Net increase (decrease) from:
Operating, investing and financing activities $(4,143) $ 5,557
Currency translation (26) (294)
(4,169) 5,263
Balance at beginning of period 9,586 10,363
Balance at end of period $ 5,417 $15,626
Supplemental disclosures - cash paid for:
Interest, net of amount capitalized $ 1,832 $ 7,901
Income taxes 9,266 7,693
</TABLE>
VALCOR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION:
The consolidated balance sheet at December 31, 1993 has been condensed from
the Company's audited consolidated financial statements at that date. The
consolidated balance sheet at June 30, 1994 and the consolidated statements of
income, cash flows and stockholder's equity for the interim periods ended
June 30, 1993 and 1994 have been prepared by the Company, without audit. In the
opinion of management, all adjustments, consisting only of normal recurring
adjustments, necessary to present fairly the consolidated financial position,
results of operations and cash flows have been made. The results of operations
for the interim periods are not necessarily indicative of the operating results
for a full year or of future operations.
Certain information normally included in financial statements prepared in
accordance with generally accepted accounting principles has been condensed or
omitted. The accompanying consolidated financial statements should be read in
conjunction with the Company's Annual Report on Form 10-K for the year ended
December 31, 1993 (the "1993 Annual Report"). Commitments and contingencies are
discussed in Note 9, Item 2 -- "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the 1993 Annual Report.
NOTE 2 - BUSINESS SEGMENT INFORMATION:
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
1993 1994 1993 1994
(In millions)
<S> <C> <C> <C> <C>
Net sales:
Forest products - Medite
Corporation $43.9 $53.4 $ 83.5 $ 93.4
Hardware products - National
Cabinet Lock, Inc. 16.0 17.5 30.4 35.5
Fast food - Sybra, Inc. 27.3 27.6 53.4 54.3
$87.2 $98.5 $167.3 $183.2
Operating income:
Forest products $ 7.4 $11.6 $ 12.8 $ 16.7
Hardware products 3.9 5.0 7.0 10.1
Fast food 2.1 2.3 4.0 3.9
13.4 18.9 23.8 30.7
Business unit disposition - - .5 -
Interest expense (.9) (4.3) (1.9) (8.6)
Income before income taxes $12.5 $14.6 $ 22.4 $ 22.1
</TABLE>
NOTE 3 - INVENTORIES:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1993 1994
(IN THOUSANDS)
<S> <C> <C>
Raw materials:
Forest products $14,704 $11,632
Hardware products 1,034 967
Fast food 1,329 1,292
17,067 13,891
In process products:
Forest products 1,450 2,074
Hardware products 3,179 3,719
4,629 5,793
Finished products:
Forest products 1,260 900
Hardware products 1,901 2,283
3,161 3,183
Supplies 3,743 3,824
$28,600 $26,691
</TABLE>
NOTE 4 - ACCRUED LIABILITIES:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1993 1994
(IN THOUSANDS)
<S> <C> <C>
Current accrued liabilities:
Employee benefits $ 9,133 $ 8,131
Interest 1,698 2,079
Insurance claims and expenses 3,304 3,979
Other 5,144 8,625
$19,279 $22,814
Other noncurrent liabilities:
Insurance claims and expenses $ 1,541 $ 1,142
Accrued OPEB cost 279 279
Other 2,419 2,183
$ 4,239 $ 3,604
</TABLE>
NOTE 5 - LONG-TERM DEBT:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1993 1994
(IN THOUSANDS)
<S> <C> <C>
Valcor - 95/8% Senior Notes Due 2003 $100,000 $100,000
Medite:
U.S. bank credit agreement 61,000 75,000
Irish bank credit agreements 8,441 16,481
State of Oregon term loan 4,328 4,236
Other 267 244
74,036 95,961
Sybra:
Bank credit agreements 13,387 2,200
Capital lease obligations 7,133 6,665
Other 41 35
20,561 8,900
National Cabinet Lock 179 160
194,776 205,021
Less current maturities 9,086 15,812
$185,690 $189,209
</TABLE>
NOTE 6 - ACCOUNTS WITH AFFILIATES:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1993 1994
(IN THOUSANDS)
<S> <C> <C>
Receivable from affiliates:
Income taxes $294 $ -
Other 19 33
$313 $ 33
Payable to affiliates:
Income taxes $ - $1,182
Other 975 144
$975 $1,326
</TABLE>
NOTE 7 - INTANGIBLE AND OTHER NONCURRENT ASSETS:
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1993 1994
(IN THOUSANDS)
<S> <C> <C>
Intangible assets:
Goodwill $ 5,500 $ 5,416
Franchise fees 7,257 6,719
Other 8,323 7,946
$21,080 $20,081
Other assets:
Deferred financing costs $ 4,189 $ 3,787
Prepaid pension cost 3,899 4,273
Property held for sale 3,810 3,994
Other 225 1,843
$12,123 $13,897
</TABLE>
NOTE 8 - PROVISION FOR INCOME TAXES:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 31,
1993 1994
(IN MILLIONS)
<S> <C> <C>
Expected tax expense $7.6 $7.7
Non-U.S. tax rates (.6) (.8)
Incremental U.S. tax on non-U.S. earnings 1.4 1.4
State income taxes and other, net .2 .5
$8.6 $8.8
</TABLE>
Expected tax expense for the 1993 period is computed at the previously-
reported U.S. federal statutory rate of 34% because the retroactive increase to
the current 35% rate was not enacted until August 1993.
NOTE 9 - COMMITMENTS AND CONTINGENCIES:
At June 30, 1994, the estimated cost to complete capital projects in
process approximated $16 million, including $11 million related to an expansion
of Medite's medium density fiberboard plant in Ireland. Medite's Irish
subsidiary has entered into certain currency forward contracts to hedge exchange
rate risk on the equivalent of approximately $6 million of equipment purchase
commitments. At June 30, 1994, the fair value of such currency contracts
approximated the contract value.
Medite has entered into interest rate swap agreements to effectively
convert $26 million of its U.S. bank term loan from a floating to a fixed
interest rate. At June 30, 1994, the estimated fair value of such swap
agreements was $1.8 million, which represents the estimated payment Medite would
receive if the swap agreements were terminated at that date.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
RESULTS OF OPERATIONS:
GENERAL
Operating income for the second quarter increased 41% to $18.9 million on a
13% sales increase to $98.5 million. For the first six months of 1994,
operating income increased 29% to $30.7 million and sales increased 10% to
$183.2 million. The improvements in sales, earnings and margins, driven by
results of the forest products and hardware products segments, are discussed
below. The Company's higher operating earnings more than offset the significant
increase in interest expense resulting from the Company's recapitalization
during the last half of 1993. Net income for the second quarter increased 18%
to $9.1 million while net income of $13.3 million for the first six months of
1994 approximated that of the first half of last year.
FOREST PRODUCTS
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, % June 30, %
1993 1994 Change 1993 1994 Change
(In millions) (In millions)
<S> <C> <C> <C> <C> <C> <C>
Net sales:
Medium density fiberboard $27.9 $32.3 +16% $53.2 $63.5 + 19%
Solid wood products 16.4 21.3 +30% 31.3 30.5 - 3%
Eliminations (.4) (.2) (1.0) (.6)
$43.9 $53.4 +22% $83.5 $93.4 + 12%
Operating income:
Medium density fiberboard $ 3.8 $ 7.3 +91% $ 5.6 $13.0 +133%
Solid wood products 3.6 4.3 +21% 7.2 3.7 - 48%
$ 7.4 $11.6 +57% $12.8 $16.7 + 31%
Operating income margins:
MDF 13.7% 22.7% 10.5% 20.5%
Solid wood 21.5% 20.1% 22.9% 12.2%
Total 16.8% 21.7% 15.3% 17.9%
</TABLE>
Medium density fiberboard. Higher volumes and prices both contributed to
the significant improvements in MDF earnings and margins, with average first
half selling prices up 14%. Sales of higher-priced specialty MDF products
continued to increase and represented 29% of MDF sales in the first half of
1994, up from 24% during the 1993 period.
Medite's primary strategic focus is to continue its expansion in the
growing market for MDF, including further penetration of higher-margin specialty
MDF markets. Medite's MDF plants are operating at a very high rate of capacity.
The expanded Irish plant, which will increase Medite's total MDF capacity by
about 25%, is expected to be operational by early 1995.
Solid wood products. Medite actively manages its timber resources and
varies its manufacture of wood products such as lumber and veneer, and
emphasizes or de-emphasizes the direct sale of logs, depending upon market
conditions. Solid wood sales and earnings fluctuations were in large part a
result of market-based volume decisions made by the Company, including (i)
varying the volume of logs offered for sale (comparatively reduced during the
first quarter and increased in the second quarter of 1994) and (ii) the
curtailment of veneer and lumber production during a portion of the second
quarter of 1994. Earnings in early 1993 were aided by higher volumes related to
reductions in certain inventories following the closure of Medite's plywood
operations in January 1993.
HARDWARE PRODUCTS
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
1993 1994 % Change 1993 1994 % Change
(In millions) (In millions)
<S> <C> <C> <C> <C> <C> <C>
Net sales $16.0 $17.5 +10% $30.4 $35.5 +17%
Operating income 3.9 5.0 +28% 7.0 10.1 +45%
Operating income margin 24.5% 28.6% 23.0% 28.4%
</TABLE>
Sales, operating income and margins all improved as volumes increased in
each of the three major product lines (locks, drawer slides and computer
keyboard support arms). National Cabinet Lock's major plants are operating at a
high rate of current capacity.
FAST FOOD
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
1993 1994 % Change 1993 1994 % Change
(In millions) (In millions)
<S> <C> <C> <C> <C> <C> <C>
Net sales $27.3 $27.6 +1% $53.4 $54.3 +2%
Operating income 2.1 2.3 +8% 4.0 3.9 -2%
Operating income margin 7.9% 8.4% 7.5% 7.2%
Arby's restaurants operated:
At end of period 159 158 -1% 159 158 -1%
Average during the period 160 157 -2% 160 157 -2%
</TABLE>
Fast food results improved during the second quarter (and were comparable
to the first half of last year) despite fewer stores being operated. Comparable
store sales have increased slightly during 1994 and new store sales have more
than offset sales of stores closed. Year-to-date earnings comparisons were
hampered by adverse winter weather during the first quarter of 1994.
OTHER
Business unit disposition. As previously reported, the gain in 1993
related to a change in estimate of the loss accrued in 1992 related to the
closure of Medite's plywood operations.
Interest expense. Interest increased principally due to higher debt levels
resulting from the Company's previously-reported 1993 recapitalization.
Approximately $137 million of the Company's long-term debt (two-thirds of
amounts outstanding at June 30, 1994) bears interest at fixed rates averaging
9.2%. The average interest rate on floating rate borrowings outstanding at June
30, 1994 was 6.6%.
Provision for income taxes. Income tax rates vary by jurisdiction (country
and/or state), and relative changes in the geographic source of the Company's
pre-tax earnings can result in fluctuations in the Company's consolidated
effective income tax rate.
LIQUIDITY AND CAPITAL RESOURCES:
CONSOLIDATED CASH FLOWS
Operating activities. Both net income and net cash provided by operating
activities were comparable for the six-month periods. Changes in assets and
liabilities result primarily from the timing of production, sales and purchases
and generally tend to even out over time. Semi-annual interest payments on the
Valcor Senior Notes began in May 1994 and accounted for about three-fourths of
the $6 million comparative increase in cash interest payments.
Investing activities. Capital expenditures were almost $17 million higher
during the first half of 1994 than in the 1993 period due primarily to Medite's
Irish plant expansion and Sybra's new store expenditures. The Company's total
capital expenditures for the last half of 1994 are estimated at $21 million,
including $11 million to substantially complete the expansion of Medite's Irish
MDF production facility and $51/2 million for Sybra's new stores and its on-
going remodeling program. Such capital expenditures are expected to be financed
primarily from operations or existing credit facilities.
Financing activities. The $10 million of net borrowings in 1994 included
$8 million of project financing for Medite's Irish plant expansion. At June 30,
1994, unused credit available to the Company's subsidiaries under existing
facilities aggregated $48 million. In addition, Medite has committed term loan
availability to finance 75% of the remaining cost of the Irish MDF expansion
that can be drawn as expenditures are made. Sybra's $20 million revolving bank
credit agreement was recently extended one year to July 1996.
OTHER
Forest Products. As discussed above, the in-process expansion of the
Medite Irish MDF plant will increase plant capacity by approximately 75% and
increase its worldwide MDF production capacity approximately 25%.
In the solid wood portion of Medite's business, new Riparian Rights Laws in
Oregon restricting timber harvest in certain areas become effective September 1,
1994. These new laws are currently expected to impact between 15 million and 20
million board feet of company-owned merchantable timber. This amounts to less
than 3% of Medite's fee timber, and only a relatively small portion of the
effected timber is expected to be permanently lost to harvest.
Hardware Products. The Company continues to explore ways to expand this
high-margin business segment.
Fast Food. Sybra opened three new Arby's restaurants during the first half
of 1994, opened one new store in July and expects to open three more restaurants
later this year. Sybra continually evaluates the profitability of its
individual restaurants, and in this regard closed five stores early in 1994 and
may close two or three additional stores later in the year.
The terms of Sybra's Consolidated Development Agreement with Arby's, Inc.
were amended in May 1994. Under the revised agreement, Sybra retains its
exclusive development rights in the Dallas/Fort Worth area, Sybra and Arby's now
have joint development rights in the Tampa area, and Sybra's required new store
opening schedule was modified. The new schedule requires Sybra to open four
stores during the last half of 1994, eight more in 1995 and an additional 13
stores by various dates through 1997. Sybra currently anticipates that its
expansion program will meet or exceed this schedule.
General corporate. Valcor's operations are conducted through its wholly-
owned subsidiaries and its long-term ability to meet its obligations
(principally debt service on the 95/8% Senior Notes) is largely dependent on the
receipt of dividends or other distributions from its subsidiaries. Various
credit agreements to which Valcor's subsidiaries are parties contain customary
limitations on the payment of dividends, typically a percentage of net income or
cash flow; however the Company believes that distributions from subsidiaries
will be sufficient to enable Valcor to meet its obligations. Valcor has not
guaranteed any indebtedness of its subsidiaries.
Valcor dividends to Valhi are generally limited to 50% of consolidated net
income, as defined, which dividends the Company currently expects to pay. At
June 30, 1994, $4.3 million was available for dividends.
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
10.1 - Letter amendment dated May 26, 1994 to the Consolidated
Development Agreement dated August 31, 1992 between Arby's, Inc. and
Sybra, Inc.
(b) Reports on Form 8-K
Reports on Form 8-K for the quarter ended June 30, 1994 and the month
of July 1994:
April 27, 1994 - Reported Items 5 and 7.
July 28, 1994 - Reported Items 5 and 7.
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.
VALCOR, INC.
(Registrant)
Date August 2, 1994 By /s/ William C. Timm
William C. Timm
Vice President - Finance and
Treasurer
(Principal Financial Officer)
Date August 2, 1994 By /s/ J. Thomas Montgomery, Jr.
J. Thomas Montgomery, Jr.
Vice President and Controller
(Principal Accounting Officer)
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.
VALCOR, INC.
(Registrant)
Date August 2, 1994 By
William C. Timm
Vice President - Finance and
Treasurer
(Principal Financial Officer)
Date August 2, 1994 By
J. Thomas Montgomery, Jr.
Vice President and Controller
(Principal Accounting Officer)
Exhibit 10.1
Arby's Inc.
P.O. Box 407008
Ft. Lauderdale, FL 33340-7008
(305) 351-5100
May 26, 1994
Mr. Charles Hyslop, President
Sybra, Incorporated
8300 Dunwoody Place
Suite 300
Atlanta, GA 30350-1290
RE: Sybra Development Agreement
Dear Chuck:
As you and I are aware, Sybra is currently in default of its Consolidated
Development Agreement for Tampa and Dallas. The Agreement required six (6) new
restaurants to be opened by December 31, 1993. Our records indicate three (3)
restaurants were opened by December 31, 1993 and an additional two (2)
restaurants (#6269 and #6285) have been opened by April 30, 1994.
Rather than terminate the Agreement, I am proposing the following:
1. Dallas market remain protected for Sybra for the initial term of the
Agreement should Sybra comply with the attached Development Schedule shown
on Exhibit "B".
2. Tampa market jointly developed by Sybra and Arby's, Inc.
o Sybra has thirty (30) days right-of-first refusal for Hillsborough,
Pasco, Polk and Hernando Counties.
o Arby's, Inc. has a thirty (30) day right-of-first refusal for Pinellas
County.
The Consolidated Development Territory set forth in Exhibit "A" attached hereto,
shall supersede the August 20, 1992, Territory.
If this Letter of Agreement and attached exhibits correctly express our
Agreement, please sign and return one copy to me in the enclosed self-addressed
envelope, acknowledging acceptance of these terms and conditions.
Sincerely,
ARBY'S, INC.
Leonard Johnson
Senior Vice President, Development
LJ:saf
Enclosure
cc: File, Anthony Foster, Priscilla Lyons, Charlotte Koziol, Karen Shelledy
EXHIBIT "A" TERRITORY
The exclusive right to develop the Texas Counties of Tarrant, Collin and Dallas.
(Dallas, Fort Worth ADI)
The non-exclusive right to develop the Florida Counties of Hillsborough, Pasco,
Polk and Hernando.
(Tampa/St. Petersburg, ADI)
EXHIBIT "B"
CONSOLIDATED DEVELOPMENT SCHEDULE
1. Five (5) licensed, open and operating Arby's Restaurants on or before April
30, 1994 (Unite Nos. 6185, 6236, 6253, 6269 and 6285).
2. Five (5) licensed, open and operating Arby's Restaurants on or before
December 31, 1994, for a cumulative total of ten (10) new restaurants.
3. Five (5) licensed, open and operating Arby's Restaurants on or before June
30, 1995, for a cumulative total of fifteen (15) new restaurants.
4. Three (3) licensed, open and operating Arby's Restaurants on or before
December 31, 1995, for a cumulative total of eighteen (18) new restaurants.
5. Six (6) licensed, open and operating Arby's Restaurants on or before
December 31, 1996, for a cumulative total of twenty-four (24) new
restaurants.
6. Seven (7) licensed, open and operating Arby's Restaurants on or before
December 31, 1997, for a cumulative total of thirty-one (31) new
restaurants.
ACKNOWLEDGED AND APPROVED
By: /s/ Leonard Johnson Date 6/15/94
(Arby's, Inc.)
By: /s/ Charles Hyslop Date 6/1/94
(Developer)
