SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1995
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______________________ to____________________
Commission file number: 1-4351
SOUTHEASTERN PUBLIC SERVICE COMPANY
(Exact name of registrant as specified in its charter)
Delaware 13-5534018
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2001 N.W. 107th Avenue, Miami, FL 33172
(Address of principal executive offices) (Zip code)
(305) 593-6565
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [ X ] No [ ]
As of October 31, 1995, all of the voting stock of the registrant
(consisting of 1,000 shares of common stock, $1.00 par value) was held by
the registrant's parent, Triarc Companies, Inc., through a wholly-owned
subsidiary.
PAGE
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
<TABLE>
SOUTHEASTERN PUBLIC SERVICE COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<CAPTION>
December 31, September 30,
1994 1995
----- -----
(In thousands)
ASSETS (A) (Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 25,807 $ 10,390
Restricted cash 6,014 3,514
Marketable securities 9,152 7,239
Note receivable from RC/Arby's
Corporation 6,550 --
Receivables, net 5,051 506
Inventories and other current assets 1,247 1,840
-------- --------
Total current assets 53,821 23,489
Due from Triarc Companies, Inc., net 27,769 35,211
Note receivable from RC/Arby's Corporation -- 8,811
Investments in affiliates 83,995 104,543
Properties, net 10,921 --
Unamortized costs in excess of net assets
of acquired companies 7,447 1,593
Other assets 4,416 4,922
-------- --------
$ 188,369 $ 178,569
======== ========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Current portion of long-term debt $ 51,056 $ 42,812
Accounts payable 1,184 142
Accrued expenses 5,907 400
Net current liabilities of
discontinued operations 4,610 4,328
-------- --------
Total current liabilities 62,757 47,682
-------- --------
Long-term debt 567 --
Other liabilities 3,043 1,100
Net non-current liabilities of discontinued
operations 1,360 695
Stockholder's equity:
Common stock 1 1
Additional paid-in capital 120,081 120,081
Retained earnings 786 9,037
Net unrealized loss on
marketable securities, net of
income taxes (226) (27)
-------- --------
Total stockholder's equity 120,642 129,092
-------- --------
$ 188,369 $ 178,569
======== ========
<FN>
(A) Derived from the audited consolidated financial statements as of
December 31, 1994.
</FN>
</TABLE>
See accompanying notes to condensed consolidated financial statements.
PAGE
<PAGE>
<TABLE>
SOUTHEASTERN PUBLIC SERVICE COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
-------------------- -----------------
1994 1995 1994 1995
----- ----- ---- ----
(In thousands)
(Unaudited)
<S> <C> <C> <C> <C>
Net sales $ 5,134 $ -- $ 20,752 $ 15,542
-------- -------- -------- --------
Costs and expenses:
Cost of sales 4,478 -- 15,758 10,993
Selling, general and
administrative 880 234 2,425 2,038
-------- -------- -------- --------
5,358 234 18,183 13,031
-------- -------- -------- --------
Operating profit (loss) (224) (234) 2,569 2,511
Other income (expense):
Interest expense (2,049) (1,696) (6,172) (5,256)
Equity in net earnings
(losses) of affiliates 1,851 (479) 5,628 6,139
Interest income from
Triarc Companies, Inc.
and its subsidiaries 881 1,314 2,592 3,503
Other, net 255 409 1,434 1,354
-------- -------- -------- --------
Net income (loss) $ 714 $ (686) $ 6,051 $ 8,251
======== ======== ======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
PAGE
<PAGE>
<TABLE>
SOUTHEASTERN PUBLIC SERVICE COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
Nine months ended
September 30,
--------------------
1994 1995
----- -----
(In thousands)
(Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net income $ 6,051 $ 8,251
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization of properties 845 521
Amortization of deferred financing costs
and original issue discount 1,084 979
Amortization of costs in excess of net assets
of acquired companies 438 215
Equity in net earnings of affiliates (5,628) (6,139)
Interest income from Triarc Companies, Inc.
and its affiliates not realized in cash (2,592) (1,204)
Other, net (685) (794)
Changes in operating assets and liabilities:
Decrease in:
Restricted cash -- 2,500
Receivables 1,997 1,850
Inventories and other current assets 338 149
Accounts payable (2,461) (549)
Accrued expenses (4,054) (3,020)
-------- --------
Net cash provided by (used in)
operating activities (4,667) 2,759
-------- --------
Cash flows from investing activities:
Proceeds from sales of subsidiaries 21,832 730
Purchases of marketable securities (10,711) (9,425)
Sales of marketable securities 11,002 11,479
Loan to RC/Arby's Corporation -- (2,450)
Capital expenditures (355) (682)
Increase in amounts due from Triarc
Companies, Inc. -- (230)
Loan to Triarc Companies, Inc. (5,200) (6,191)
Purchase of notes receivable (1,239)
Other, net 28 (640)
-------- --------
Net cash provided by (used in)
investing activities 15,357 (7,409)
-------- --------
Cash flows from financing activities:
Repayments of long-term debt (9,025) (9,042)
Redemption of subsidiary preferred stock (703) --
-------- --------
Net cash used in financing activities (9,728) (9,042)
-------- --------
Net cash provided by (used in) continuing
operations 962 (13,692)
Net cash used in discontinued operations (1,571) (1,725)
-------- --------
Net decrease in cash and cash equivalents (609) (15,417)
Cash and cash equivalents at beginning of period 22,813 25,807
-------- --------
Cash and cash equivalents at end of period $ 22,204 $ 10,390
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
PAGE
<PAGE>
SOUTHEASTERN PUBLIC SERVICE COMPANY AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
September 30, 1995
(Unaudited)
1. Basis of Presentation
Southeastern Public Service Company and subsidiaries (the "Company") is
an indirect wholly-owned subsidiary of Triarc Companies, Inc. ("Triarc").
The accompanying unaudited condensed consolidated financial statements
of the Company have been prepared in accordance with Rule 10-01 of
Regulation S-X promulgated by the Securities and Exchange Commission and,
therefore, do not include all information and footnotes necessary for a fair
presentation of financial position, results of operations and cash flows in
conformity with generally accepted accounting principles. In the opinion of
the Company, however, the accompanying condensed consolidated financial
statements contain all adjustments, consisting only of normal recurring
adjustments, necessary to present fairly the Company's financial position as
of December 31, 1994 and September 30, 1995, its results of operations for
the three and nine-month periods ended September 30, 1994 and 1995 and its
cash flows for the nine-month periods ended September 30, 1994 and 1995.
This information should be read in conjunction with the consolidated
financial statements and notes thereto included in the Company's Annual
Report on Form 10-K for the year ended December 31, 1994 ("Form 10-K").
Certain amounts included in the prior period's condensed consolidated
financial statements have been reclassified to conform with the current
period's presentation.
2. Public Gas Merger
Effective June 29, 1995 Public Gas Company ("Public Gas"), previously a
wholly-owned subsidiary engaged in the liquefied petroleum gas business, was
merged with and into National Propane Corporation ("National Propane"), an
indirect wholly-owned subsidiary of Triarc (the "Merger"). In consideration
for its investment in Public Gas, the Company received 24.8% (see Note 4) of
the issued and outstanding shares of common stock of the merged corporation
which was a proportionate share based upon the relative fair values of
Public Gas and National Propane. The Company's investment in National
Propane was recorded initially at the $14,220,000 net book value of Public
Gas at the date of the Merger since such merger is a transfer of assets and
liabilities in exchange for shares among a controlled group of companies.
Such investment subsequent to June 29, 1995 is being accounted for in
accordance with the equity method of accounting. Since the Company's
ownership interest enables it to exert significant influence over the
surviving corporation, the Company continued to reflect the liquefied
petroleum gas business as a continuing operation through the Merger date.
3. Discontinued Operations
As of September 30, 1995 the Company has completed the sale of
substantially all of its discontinued operations, but there remain, however,
certain environmental and other liabilities to be liquidated (the estimates
of which have been previously accrued) as well as certain contingent assets
which may be collected (the benefits of which have not been recorded). The
contingent assets are principally comprised of two notes from the sale of
the refrigeration business in the remaining amounts as of September 30, 1995
of $3,934,000 (discounted value $3,285,000) and $3,000,000 (discounted value
$2,567,000). The Company expects the liquidation of the remaining
liabilities associated with the discontinued operations will not have a
material impact on its consolidated financial position or results of
operations.
4. Investments in Affiliates
Investments in affiliates consisted of the following (in thousands):
<TABLE>
<CAPTION>
December 31, September 30,
1994 1995
---- ----
<S> <C> <C>
Graniteville Company $ 83,722 $ 91,039
CFC Holdings Corp. 273 --
National Propane (A) -- 13,504
-------- --------
$ 83,995 $ 104,543
======== ========
<FN>
(A) See Note 2, "Public Gas Merger" for a discussion of the investment in
National Propane.
</FN>
</TABLE>
Equity in net earnings (losses) of affiliates consisted of the following
(in thousands):
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
------------------ ------------------
1994 1995 1994 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Graniteville Company $ 1,886 $ 511 $ 5,461 $ 7,317
CFC Holdings Corp. (35) (274) 167 (462)
National Propane -- (716) -- (716)
-------- -------- -------- --------
$ 1,851 $ (479) $ 5,628 $ 6,139
======== ======== ======== ========
</TABLE>
During the three months ended September 30, 1995 the Company's equity in
losses of CFC Holdings, Corp. ("CFC") exceeded the carrying value of its
investment in CFC by $189,000. Therefore, the Company has reduced its note
receivable from RC/Arby's Corporation ("RCAC"), a wholly-owned subsidiary of
CFC and indirect wholly-owned subsidiary of Triarc, by this amount.
On September 29, 1995 Triarc contributed to National Propane all of the
stock of a company that had recently acquired all of the stock of two
entities in the liquefied petroleum gas business with a net book value at
September 29, 1995 of $4,248,000. In exchange Triarc received additional
shares of National Propane effectively diluting the Company's investment in
National Propane from 24.8% to 24.3%.
Summary consolidated results of operations of Graniteville Company
("Graniteville"), a 50% owned affiliate (49% owned prior to August 30,
1994), for the three and nine-month periods ended September 30, 1994 and
1995 are as follows (in thousands):
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
------------------- -------------------
1994 1995 1994 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Operating revenues $ 133,474 $ 126,186 $ 407,147 $ 409,034
Operating profit 8,630 6,542 24,996 23,230
Net income 3,824 1,022 11,121 14,635
</TABLE>
Under its credit facility as amended on August 3, 1995, Graniteville is
not permitted to pay dividends or make loans or advances to its
stockholders, including the Company, until the outstanding principal balance
of Graniteville's term loan is less than $55,000,000 (the outstanding
principal balance was $86,000,000 as of September 30, 1995). In accordance
with the amended repayment terms of the term loan, Graniteville is not
scheduled to be able to pay any dividends or make any loans or advances to
the Company prior to December 31, 1998 (however, see disclosure below of the
intended sale of Graniteville and the related assumption of $174,400,000 of
its debt, including debt under the credit facility in the currently
estimated amount of $163,000,000).
On September 22, 1995 Triarc entered into a letter of intent with Galey &
Lord, Inc. ("Galey & Lord") whereby Galey & Lord will acquire the textile
division of Graniteville, including the assumption by the buyer of
$174,400,000 of Graniteville's long-term debt. The textile division being
sold excludes the assets of C.H. Patrick & Co., Inc., Graniteville's wholly-
owned subsidiary, and certain other assets, principally real estate and a
note receivable from Triarc, not directly related to the textile division
being sold. The textile division had revenues in the currently estimated
amounts of $497,000,000 and $376,000,000, operating profit in the currently
estimated amounts of $21,000,000 and $15,000,000 and net income in the
currently estimated amounts of $3,073,000 and $507,000 for the year ended
December 31, 1994 and the nine months ended September 30, 1995,
respectively. Galey & Lord had revenues of $451,130,000 and $387,787,000
and net income of $17,283,000 and $9,504,000 for their fiscal year ended
October 1, 1994 and the nine months ended July 1, 1995, respectively.
The letter of intent contemplates the issuance by Galey & Lord of 34.5%
of its outstanding common stock, on a fully diluted basis, to Triarc, of
which the Company would have a 50% interest based upon its ownership of
Graniteville, or 17.25% of the outstanding common stock of Galey & Lord.
Using the current number of outstanding common shares of Galey & Lord and a
per share price of $12.50 (the October 31, 1995 closing price on the New
York Stock Exchange), the Company would have an ownership interest of
approximately 3,200,000 newly-issued shares with an aggregate market value
of approximately $40,000,000. Since the sale of the textile division is
considered to be an exchange of productive assets, the investment will be
initially recorded at the Company's interest in the then current book value
of the textile division (currently estimated at approximately $36,000,000 as
of September 30, 1995), which is a component of its investment in
Graniteville, and no gain or loss will be recorded as the result of such
sale.
The letter of intent is subject to the execution of a definitive
agreement, approval by the board of directors and stockholders of Galey &
Lord and Triarc's board of directors, regulatory approvals and other
customary closing conditions. The Company presently understands the
transaction will close during the first half of 1996.
5. Income Taxes
The Internal Revenue Service is currently examining the Company's
Federal income tax returns for the tax years from 1989 through 1992 and has
issued to date, principally during the third quarter of 1995, notices of
proposed adjustments increasing taxable income by approximately $6,500,000,
the tax effect of which has not yet been determined. The Company has not
yet evaluated the majority of the proposed adjustments and, accordingly, the
amount of any payments required as a result thereof cannot presently be
determined. However, management of the Company believes that adequate
aggregate provisions have been made in prior periods for any tax
liabilities, including interest, that may result from the resolution of such
proposed adjustments.
6. Transactions with Affiliates
The Company continues to have certain related party transactions with
Triarc and its subsidiaries of the same nature and general magnitude (except
for loans to Triarc and RCAC set forth below) as those described in Note 17
to the consolidated financial statements contained in the Form 10-K.
The Company loaned an additional $2,450,000 (see Note 4 for the write-
down of $189,000) under the promissory note from RCAC (the "RCAC Note") and
the maturity of such note was extended to December 1996.
The Company loaned $7,869,000 under a demand promissory note from Triarc
(the "Demand Note"), of which $1,678,000 was used as an offset to interest
otherwise payable to the Company with respect to the Company's $26,538,000
promissory note from Triarc.
During the three and nine-month periods ended September 30, 1995 the
Company recorded $213,000 and $585,000, respectively, of interest income on
the RCAC Note and $228,000 and $335,000, respectively, of interest income on
the Demand Note which have been included in "Interest income from Triarc
Companies, Inc. and its subsidiaries" in the condensed consolidated
statements of operations.
7. Contingencies
The Company continues to have legal and environmental contingencies of
the same nature and general magnitude as those described in Note 20 to the
consolidated financial statements contained in Form 10-K.
After considering amounts provided in previous periods, the Company does
not believe that the contingencies referred to above, as well as ordinary
routine litigation, will have a material adverse effect on its consolidated
financial position or results of operations.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
INTRODUCTION
The "Management's Discussion and Analysis of Financial Condition and
Results of Operations" included herein should be read in conjunction with
"Item 7. - Management's Discussion and Analysis of Financial Condition and
Results of Operations" in the Annual Report on Form 10-K for the year ended
December 31, 1994 ("Form 10-K") of Southeastern Public Service Company (the
"Company").
Effective June 29, 1995 Public Gas Company ("Public Gas"), previously a
wholly-owned subsidiary engaged in the liquefied petroleum gas business, was
merged (the "Merger") with and into National Propane Corporation ("National
Propane"), an indirect wholly-owned subsidiary of Triarc Companies, Inc.
("Triarc"), the Company's indirect parent. In consideration for its
investment in Public Gas, the Company received 24.8% (reduced to 24.3% as of
September 29, 1995) of the issued and outstanding shares of common stock of
the merged corporation. Such investment subsequent to June 29, 1995 is
being accounted for in accordance with the equity method of accounting.
Since the Company's ownership interest enables it to exert significant
influence over the surviving corporation, the Company has continued to
reflect the liquefied petroleum gas business as a continuing operation
through the Merger date. All of the Company's sales and cost of sales and
substantially all of the Company's selling, general and administrative
expenses for all of the periods presented through June 29, 1995 related to
Public Gas and, accordingly, as a result of the Merger, subsequent to June
29, 1995 the Company is no longer reporting any sales or cost of sales and
substantially lower selling, general and administrative expenses.
RESULTS OF OPERATIONS
Nine Months Ended September 30, 1995 Compared with Nine Months Ended
September 30, 1994.
Net sales decreased $5.2 million to $15.5 million in the nine months
ended September 30, 1995 primarily as a result of the Merger.
Operating profit decreased $0.1 million to $2.5 million in the nine
months ended September 30, 1995 reflecting a gross profit decrease of $0.5
million significantly offset by a decrease of $0.4 million in selling,
general and administrative expenses both of which are due to the Merger.
Interest expense decreased $0.9 million to $5.3 million in the nine
months ended September 30, 1995 due to a lower level of debt outstanding
during 1995 primarily as a result of the annual $9.0 million sinking fund
payment made on February 1, 1995 on the 11 7/8% senior subordinated
debentures due February 1, 1998 (the "Debentures").
Equity in net earnings of affiliates increased $0.5 million to $6.1
million in the nine months ended September 30, 1995 due to a $1.8 million
increase in the equity in earnings of Graniteville Company ("Graniteville"),
partially offset by (i) a $0.6 million decrease relating to CFC Holdings
Corp. ("CFC") and (ii) $0.7 million of equity in losses of National Propane
included effective June 29, 1995 as a result of the Merger. Net income at
Graniteville increased $3.5 million (in which the Company has a 50% interest
as of August 30, 1994 and 49% prior thereto) during the nine months ended
September 30, 1995 resulting from increased other income of $10.9 million
less decreased operating profit of $1.8 million, increased interest expense
of $3.3 million and higher income taxes of $2.3 million. The decrease in
operating profit reflected reduced gross margins due to higher costs of raw
materials which could not be fully passed on to customers in the form of
increased selling prices. The increase in other income reflected (i) a
$12.0 million gain on the sale of excess timberland and (ii) a $1.9 million
gain on an insurance recovery relating to fire-damaged equipment, partially
offset by a $1.7 million loss resulting from Graniteville's equity in losses
of a Taiwanese joint venture investment made in August 1994. Graniteville's
interest expense increased principally due to an increase in interest rates
on its floating-rate debt and, to a lesser extent, to higher borrowing
levels. Net income at CFC decreased $11.6 million (in which the Company has
a 5.4% interest) to a net loss of $8.7 million for the nine months ended
September 30, 1995 primarily resulting from an $18.9 million increase in
selling, general and administrative expenses partially offset by an $8.1
million increase in gross profit. The increase in selling, general and
administrative expenses principally resulted from increased advertising and
increased costs associated with building an infrastructure to facilitate
expansion plans. The increase in gross profit is the result of increased
revenues primarily from an increase in company-owned restaurants. The
results for National Propane reflect a seasonally slower period.
Interest income from Triarc Companies, Inc. and its subsidiaries
increased $0.9 million to $3.5 million in the nine months ended September
30, 1995 of which $0.6 million is due to loans subsequent to September 30,
1994 to RC/Arby's Corporation ("RCAC"), a subsidiary of CFC and an indirect
subsidiary of Triarc, and $0.3 million is due to additional loans to Triarc.
Other, net decreased $0.1 million to $1.4 million of income in the nine
months ended September 30, 1995.
The Company did not have any provision for income taxes for the nine-
month periods ended September 30, 1994 and 1995 due to non-taxable equity in
earnings of affiliates which would be subject to the dividend exclusion upon
any distribution of such earnings and the release of valuation allowances
attributable to the utilization of net operating and other loss and tax
credit carryforwards.
Three Months Ended September 30, 1995 Compared with Three Months Ended
September 30, 1994
There were no net sales in the three months ended September 30, 1995 due
to the Merger.
The Company had an operating loss of $0.2 million in both the three
months ended September 30, 1994 and 1995. The 1994 amount principally
represents the results of the operations of Public Gas while the 1995 amount
primarily represents the Company's remaining ongoing administrative
expenses, principally legal fees.
Interest expense decreased $0.4 million to $1.7 million in the three
months ended September 30, 1995 due to a lower level of debt outstanding
during 1995 primarily as a result of the annual $9.0 million sinking fund
payment on the Debentures made on February 1, 1995.
Equity in net earnings (losses) of affiliates decreased $2.3 million to
a loss of $0.5 million in the three months ended September 30, 1995 due to a
$1.4 million decrease in the equity in earnings of Graniteville, a $0.2
million increase in the equity in losses of CFC and $0.7 million of equity
in losses of National Propane, as a result of the Merger. Net income at
Graniteville decreased $2.8 million during the 1995 quarter resulting from
(i) a $2.1 million decrease in operating profit, (ii) increased interest
expense of $0.7 million and (iii) a $1.5 million decrease in other income,
reduced by the tax thereon of $1.5 million. The decrease in operating
profit reflected lower revenues and reduced gross margins, due to higher
costs of raw materials which could not be fully passed on to customers in
the form of higher selling prices. Interest expense increased due to an
increases in interest rates and borrowing levels. Other income decreased
primarily due to decreased intercompany interest income and increased equity
in losses of a Taiwanese joint venture investment made in August 1994. The
results for National Propane reflect a seasonally slower period.
Interest income from Triarc Companies, Inc. and its subsidiaries
increased $0.4 million to $1.3 million in the three months ended September
30, 1995 of which $0.2 million is due to loans to RCAC subsequent to
September 30, 1994 and $0.2 million is due to additional loans to Triarc.
Other, net increased $0.2 million to $0.4 million of income in the three
months ended September 30, 1995.
The Company did not have any provision for income taxes for the three-
month period ended September 30, 1994 due to the non-taxable equity in
earnings of affiliates. There was no benefit for income taxes in the 1995
period since the Company is in a net operating loss position.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents (collectively, "Cash") and marketable
securities, excluding restricted cash, decreased $17.3 million during the
nine months ended September 30, 1995 to $17.6 million. Such decrease
reflects (i) scheduled repayments of long-term debt of $9.0 million, (ii)
$8.7 million of aggregate loans to Triarc and RCAC, (iii) net Cash used in
discontinued operations of $1.7 million and (iv) other investing activities
of $0.7 million, all offset slightly by net Cash provided by operations of
$2.8 million.
At September 30, 1995 the Company had a receivable from Triarc of $35.2
million including a $26.5 million promissory note (the "Note") and a demand
promissory note (the "Demand Note") with a principal amount of $7.9 million
plus accrued and unpaid interest on the Note and Demand Note of $0.6 million
and $0.2 million, respectively. The Note and Demand Note bear interest,
however, the Company does not expect any cash flows from interest since the
Company expects to be required to make loans to Triarc approximating the
amount of any interest received, except for collections, if any, on the Note
in connection with the anticipated repayment of the Debentures (see below).
On July 22, 1993 the Company's Board of Directors authorized the sale or
liquidation of its utility and municipal services, refrigeration and natural
gas and oil ("NG&O") business segments which have been accounted for as
discontinued operations in the Company's consolidated financial statements.
In February 1995, the Company completed the sale of the stock of the
remaining operations of the NG&O segment for net proceeds of $0.7 million
and as of September 30, 1995 the Company has completed the sale of
substantially all of its discontinued operations. There remain, however,
certain environmental and other liabilities to be liquidated (the estimates
of which have been previously accrued) as well as certain contingent assets
which may be collected (the benefits of which have not been recorded). The
contingent assets are principally comprised of two notes from the sale of
the refrigeration business in the remaining amounts of $3.9 million and $3.0
million with no remaining scheduled collections in 1995.
On September 22, 1995 Triarc entered into a letter of intent with Galey
& Lord, Inc. ("Galey & Lord") whereby Galey & Lord will acquire the textile
division of Graniteville, including the assumption by the buyer of $174.4
million of Graniteville's long-term debt including debt under Graniteville's
amended credit facility in the currently estimated amount of approximately
$163.0 million. The letter of intent contemplates the issuance by Galey &
Lord of 34.5% of its outstanding common stock, on a fully diluted basis, to
Triarc of which the Company would have a 50% interest based upon its
ownership of Graniteville, or 17.25% of the outstanding common stock of
Galey & Lord. See Note 7 to the accompanying condensed consolidated
financial statements for further details regarding the sale and the textile
division being sold. Assuming such transaction is consummated, the Company
does not expect its investment in the new combined company to be a source of
cash since cash dividends are not currently paid on the common stock of
Galey & Lord.
The Company previously reported that in connection with the Merger it
intends to redeem the Debentures ($45.0 million principal amount as of
September 30, 1995) by December 31, 1995, which is prior to maturity. The
Company presently anticipates financing such redemption with the collection
of a minimum of $22.7 million on the Note (Triarc's pro-rata share of a
$30.0 million dividend expected to be declared by National Propane for such
purpose), the Company's $7.3 million pro-rata share of such dividend, and
the Company's available Cash and marketable securities ($17.6 million at
September 30, 1995) together with the $4.0 million October 1995 collection
on the promissory note from RCAC (the "RCAC Note"). Although the Company is
informed that it is Triarc's intention to repay the Note, there can be no
assurance National Propane will declare such dividend and, accordingly,
that Triarc will be able to obtain sufficient cash to do so. Accordingly,
there can also be no assurance that the Debentures will be redeemed prior to
maturity.
Under its credit facility agreement as amended on August 3, 1995,
Graniteville is not scheduled to be able to pay any dividends or make any
loans or advances to its stockholders, including the Company, prior to
December 31, 1998, and Graniteville's ability to do so thereafter will be
limited (however, assuming consummation of the sale of Graniteville to Galey
& Lord and the assumption of debt as discussed above, such restriction may
be modified). In addition, under the terms of its bank facility, National
Propane is limited in its ability to pay dividends or make advances to the
Company other than $30.0 million of availability (of which $7.3 million will
be dividended to the Company and $22.7 million to Triarc) which is
restricted to the redemption of the Debentures. Accordingly, any earnings
from the Company's investments in Graniteville and National Propane will not
provide any cash flows to the Company in 1995.
The Company made its annual $9.0 million sinking fund payment on the
Debentures on February 1, 1995 and paid the interest due on the Debentures
on February 1, 1995 and August 1, 1995. No other payments are required on
the Debentures in 1995. However, as previously discussed, the Company
presently intends to redeem the remaining $45.0 million principal amount of
the Debentures prior to maturity in December 1995.
The Company has $3.5 million of restricted cash as of September 30, 1995
of which $2.75 million supports letters of credit which collateralize
certain performance and other bonds relating to the former utility and
municipal services segment and $0.75 million represents funds held in escrow
resulting from the sale of the natural gas and oil business. In October
1995 the restriction on $0.25 million of the $0.75 million of funds held in
escrow was removed. The Company does not anticipate any of the remaining
restrictions to be removed during the remainder of 1995.
The Internal Revenue Service ("IRS") is currently examining the
Company's Federal income tax returns for the tax years from 1989 through
1992 and has issued to date, principally during the third quarter of 1995,
notices of proposed adjustments increasing taxable income by approximately
$6.5 million, the tax effect of which has not yet been determined. The
Company has not yet evaluated the majority of the proposed adjustments and
accordingly, the amount and timing of any payments required as a result
thereof cannot presently be determined.
The Company had Cash provided by operating activities of $2.8 million
during the nine months ended September 30, 1995. Such amount consisted of
(i) $8.3 million of net income and (ii) net changes in operating assets and
liabilities of $0.9 million, less net non-cash adjustments of $6.4 million.
Significant cash requirements for the remainder of 1995, excluding
requirements related to the intended redemption of the Debentures discussed
above, will include approximately $0.3 million of Cash to be used by
continuing operations and approximately $2.0 million of Cash to be used by
discontinued operations. Other than its Cash and marketable securities, the
Company's only remaining significant sources of Cash effectively are (i)
collections of contingent assets from its discontinued operations, of which
there are no contractual collections during the remainder of 1995, (ii) an
anticipated $7.3 million dividend from National Propane which will be
restricted to the redemption of the Debentures and/or (iii) collections, if
any, on the intercompany Note, Demand Note and RCAC Note (of which $4.0
million was collected subsequent to September 30, 1995). However, the
Company believes that its existing Cash and marketable securities will be
more than sufficient to enable the Company to meet its short-term cash
requirements for the remainder of 1995 and, assuming the Company receives
$7.3 million of dividends from National Propane and Triarc repays
approximately $22.7 million on the Note, there will be sufficient Cash and
marketable securities to redeem the Debentures by December 31, 1995.
CONTINGENCIES
The Company continues to have legal and environmental contingencies of
the same nature and general magnitude as those described in "Item 7. -
Management's Discussion and Analysis of Financial Condition and Results of
Operations" contained in the Form 10-K. After considering amounts provided
in prior periods, the Company does not believe that the contingencies
referred to above, as well as ordinary routine litigation, will have a
material adverse effect on its consolidated financial position or results of
operations.
<PAGE>
SOUTHEASTERN PUBLIC SERVICE COMPANY AND SUBSIDIARIES
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
As a result of certain environmental audits in 1991 at the Company's
ice manufacturing facilities of the Refrigeration segment, the Company
became aware of possible hydrocarbons and metal contamination at certain
sites. The Company filed appropriate notifications with state
environmental authorities and began testing and subsequently remediating
such sites. Remediation varied from site to site, ranging from testing of
soil and groundwater for contamination, removal of certain underground
storage and other tanks to the removal of contaminated soils at certain
locations and the remediation of contaminated groundwater at one site.
As part of the ongoing testing and remediation resulting from the 1991
environmental audits and because the Company's ice manufacturing business
was being sold, additional environmental testing was performed during 1994
on each of the ice properties. As a result of these environmental audits,
it was determined that certain remediation, primarily removing hydrocarbons
in soils and hydrocarbons in the groundwater caused by underground storage
tanks and removing elevated metals in the soil, was required on thirteen
ice manufacturing properties. The Company has filed appropriate
notifications with state environmental authorities. The remediation
process, including more definitive testing on certain properties, continued
during 1994 and 1995 on the properties located in Phoenix, AZ; Tuscon, AZ;
Wilcox, AZ (remediated in 1995); El Centro, CA; Marathon, FL; Miami, FL;
Albuquerque, NM; and Memphis, TN (remediated in 1995). During 1994
approximately $612,000 (net of $228,000 reimbursed by the purchaser) was
spent to remediate these ice manufacturing properties. The estimated
future remediation expenditure after September 30, 1995 is approximately
$1,300,000, of which $500,000 will be reimbursed by the purchaser. As
part of the sale of the ice business, the purchaser agreed to reimburse the
Company for the first and third payments of $500,000, or a total of $1
million of environmental remediation expenditures. Additionally, the
purchaser agreed to pay for the second $500,000 of remediation, which is the
responsibility of the Company, however, the purchaser would receive the
benefit from a dollar for dollar reduction in the amount of a
seller-financed note owed by the purchaser to the Company. The purchaser is
current in payments of amounts owed to the Company.
Environmental audits were also performed in 1994 on each of the cold
storage properties of the Refrigeration segment in conjunction with the
sale of this business. As a result of these audits, certain remediation,
primarily removing hydrocarbons in soil and hydrocarbons in the groundwater
related to underground petroleum storage tanks and removing certain
asbestos containing material (ACM) from certain buildings, will be required
at seven sites at a total estimated cost of approximately $1,300,000. The
Company has filed appropriate notifications with state environmental
authorities, where necessary. As part of the sale of the cold storage
business, the purchaser agreed to pay the first $1,250,000 of the required
remediation expenditure. Remediation commenced on these properties in 1995.
The Company also has various inactive properties, of which four were
remediated at a cost of $484,000 and sold during 1994 and two were
remediated at a cost of $160,000 in 1995. These include Provo, UT; Salt
Lake City, UT; Uvalde, TX; and three properties in Portland, OR. At
December 31, 1994, there were 22 inactive sites, of these, three have been
sold and 19 remain as of September 30, 1995. All of these remaining
inactive properties are expected to be sold in individual transactions.
Environmental audits are expected to be performed in conjunction with each
sale, where necessary. Environmental audits have been completed, or are in
process on 10 of the 19 remaining inactive properties. The remediation
process, including more definitive environmental testing, commenced during
1994 and is continuing as of September 30, 1995 on properties in Denver,
CO; Willard, OH; Brownsville, TX; Harlingen, TX; LaBlanca, TX; Topeka KS;
Ogden, UT; Monett, MO; Butte, MT; and Belle Glade, FL. Certain
remediation of hydrocarbons in soils, asbestos containing material (ACM) in
certain buildings and elevated metals in soils will be necessary on the
other properties. Based on the remediation cost estimates resulting from
the environmental audits and management's remediation estimates, including
remediation estimates for six untested sites, it is expected that future
remediation costs for inactive properties will total approximately $500,000
as of September 30, 1995.
The total future environmental remediation expenditures is estimated
by the Company as of September 30, 1995 at approximately $3,150,000, of
which $1,750,000 is expected to be reimbursed to the Company by the
purchaser of the ice and cold storage business and approximately $1,400,000
is expected to be paid by the Company.
Item 5. Other Information
On August 21, 1995 Triarc Companies, Inc., the indirect parent of the
Company ("Triarc"), through its subsidiary, All Seasons Acquisition Corp.
("ASAC"), acquired all of the outstanding shares of All Seasons Propane,
Inc. and Cullum Investments, Inc., corporations engaged in the distribution
of propane gas in Colorado. The purchase price for such stock was
approximately $4.24 million (including the assumption of certain existing
indebtedness), in the aggregate. In connection with the transaction, the
sellers agreed to certain five-year non-competition covenants. On
September 29, 1995 the stock of ASAC was contributed to the capital of
National Propane Corporation ("NPC") and the Company's 24.8% interest in
NPC was reduced to 24.3%.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
2.1 - Letter of Intent dated September 22, 1995 between Triarc and
Galey & Lord, Inc., incorporated herein by reference to
Exhibit 2.1 to the Company's Current Report on Form 8-K
dated September 22, 1995 (SEC file No. 1-4351).
2.2 - Letter Agreement dated November 3, 1995 between Galey &
Lord, Inc. ("Galey") and Triarc amending the Letter of
Intent dated September 22, 1995 between Galey and Triarc,
incorporated herein by reference to Exhibit 10.2 to Triarc's
Quarterly Report on Form 10-Q for the quarter ended
September 30, 1995 (SEC file No. 1-2207).
2.3 - Amendment No. 6 dated as of August 30, 1995 to the Revolving
Credit, Term Loan and Security Agreement, dated as of April
23, 1993, among Graniteville Company, C.H. Patrick & Co.,
Inc., the CIT Group/Commercial Services, Inc., as agent, and
the other financial institutions party thereto (the
"Graniteville Credit Agreement"), incorporated herein by
reference to Exhibit 10.2 to Triarc's Current Report on Form
8-K dated August 9, 1995 (SEC file No. 1-2207).
2.4 - Amendment No. 7 dated as of August 30, 1995 to the
Graniteville Credit Agreement, incorporated herein by
reference to Exhibit 10.2 to Triarc's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1995 (SEC file
No. 1-2207).
2.5 - Fourth Amendment dated as of September 29, 1995 to Revolving
Credit and Term Loan Agreement dated as of October 7, 1994
among National Propane Corporation, The Bank of New York, as
administrative agent, The First National Bank of Boston and
Internationale Nederlanden (U.S.) Capital Corporation, as
co-agents, and the lenders party thereto, incorporated
herein by reference to Exhibit 10.2 to Triarc's Quarterly
Report on Form 10-Q for the quarter ended September 30, 1995
(SEC file No. 1-2207).
2.6 - Financial Data Schedule for the nine months ended
September 30, 1995, submitted to the Securities and
Exchange Commission in electronic format.
(b) Reports on Form 8-K
The Company filed a Current Report on Form 8-K on October 5, 1995
with respect to the execution of a letter of intent regarding a
merger of Graniteville Company, a 50% owned affiliate of the
Company, and Galey.
<PAGE>
SOUTHEASTERN PUBLIC SERVICE COMPANY AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SOUTHEASTERN PUBLIC SERVICE COMPANY
Date: November 20, 1995 BY: /S/ JOSEPH A. LEVATO
---------------------
Joseph A. Levato
Executive Vice President and
Chief Financial Officer
(On behalf of the Company)
/S/ FRED H. SCHAEFER
---------------------
Fred H. Schaefer
Vice President and
Chief Accounting Officer
(Principal accounting officer)
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
condensed consolidated financial statements included in the accompanying Form
10-Q of Southeastern Public Service Company for the nine-month period ended
September 30, 1995 and is qualified in its entirety by reference to such Form
10-Q.
</LEGEND>
<CIK> 0000092050
<NAME> SOUTHEASTERN PUBLIC SERVICE COMPANY
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 10,390
<SECURITIES> 7,239
<RECEIVABLES> 506
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 23,489
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 178,569
<CURRENT-LIABILITIES> 47,682
<BONDS> 0
<COMMON> 1
0
0
<OTHER-SE> 129,092
<TOTAL-LIABILITY-AND-EQUITY> 178,569
<SALES> 15,542
<TOTAL-REVENUES> 15,542
<CGS> 10,993
<TOTAL-COSTS> 10,993
<OTHER-EXPENSES> 2,038
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,256
<INCOME-PRETAX> 8,251
<INCOME-TAX> 0
<INCOME-CONTINUING> 8,251
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,251
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
