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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 30, 2003
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from ______________ to _______________
Commission file number: 1-2207
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TRIARC COMPANIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 38-0471180
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
280 Park Avenue, New York, New York 10017
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(Address of principal executive offices) (Zip Code)
(212) 451-3000
--------------
(Registrant's telephone number, including area code)
--------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
(X) Yes ( ) No
Indicate by check mark whether the registrant is an accelerated filer
(as defined in Rule 12b-2 of the Exchange Act).
(X) Yes ( ) No
There were 20,947,333 shares of the registrant's Class A Common Stock
outstanding as of April 30, 2003.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
TRIARC COMPANIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
December 29, March 30,
2002 (A) 2003
-------- ----
(In Thousands)
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents.........................................................$ 457,472 $ 467,525
Short-term investments............................................................ 175,161 157,429
Receivables ..................................................................... 12,967 11,499
Inventories....................................................................... 2,274 2,147
Deferred income tax benefit....................................................... 15,934 15,848
Prepaid expenses and other current assets......................................... 6,471 6,702
---------- ----------
Total current assets........................................................... 670,279 661,150
Restricted cash equivalents............................................................ 32,476 32,470
Investments............................................................................ 34,717 30,610
Properties............................................................................. 115,224 112,874
Goodwill .............................................................................. 90,689 90,689
Other intangible assets................................................................ 8,291 8,301
Deferred costs and other assets........................................................ 16,604 16,791
---------- ----------
$ 968,280 $ 952,885
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt.................................................$ 34,422 $ 38,037
Accounts payable.................................................................. 18,998 15,936
Accrued expenses.................................................................. 73,338 66,334
Net current liabilities relating to discontinued operations....................... 33,083 35,209
---------- ----------
Total current liabilities...................................................... 159,841 155,516
Long-term debt......................................................................... 352,700 340,917
Deferred compensation payable to related parties....................................... 25,706 26,495
Deferred income taxes.................................................................. 60,967 60,704
Other liabilities, deferred income and minority interests in a consolidated subsidiary. 36,324 36,562
Stockholders' equity:
Common stock...................................................................... 2,955 2,955
Additional paid-in capital........................................................ 131,708 132,186
Retained earnings................................................................. 360,995 359,021
Common stock held in treasury..................................................... (162,084) (160,714)
Accumulated other comprehensive deficit........................................... (832) (757)
---------- ----------
Total stockholders' equity..................................................... 332,742 332,691
---------- ----------
$ 968,280 $ 952,885
========== ==========
(A) Derived from the audited consolidated financial statements as of
December 29, 2002.
See accompanying notes to condensed consolidated financial statements.
TRIARC COMPANIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended
--------------------------------
March 31, March 30,
2002 2003
---- ----
(In Thousands Except Per Share Amounts)
(Unaudited)
Revenues:
Net sales..........................................................................$ -- $ 48,497
Royalties and franchise and related fees (A)....................................... 22,381 21,237
---------- ---------
22,381 69,734
---------- ---------
Costs and expenses:
Cost of sales, excluding depreciation and amortization............................. -- 36,255
Advertising and selling............................................................ 45 3,100
General and administrative......................................................... 19,461 23,380
Depreciation and amortization, excluding amortization of deferred financing costs.. 1,581 3,383
---------- ---------
21,087 66,118
---------- ---------
Operating profit............................................................. 1,294 3,616
Interest expense........................................................................ (6,360) (8,458)
Insurance expense related to long-term debt............................................. (1,175) (1,092)
Investment income, net.................................................................. 6,062 3,141
Other income (expense), net............................................................. (570) 557
---------- ---------
Loss before income taxes..................................................... (749) (2,236)
(Provision for) benefit from income taxes............................................... (297) 262
---------- ---------
Net loss.....................................................................$ (1,046) $ (1,974)
========== =========
Loss per share:
Basic........................................................................$ (.05) $ (.10)
========== =========
Diluted......................................................................$ (.05) $ (.10)
========== =========
(A) Includes royalties from Sybra, Inc. of $1,736,000 for the three months
ended March 31, 2002 whereas the royalties from Sybra, Inc. of
$1,677,000 for the three months ended March 30, 2003 were eliminated
in consolidation.
See accompanying notes to condensed consolidated financial statements.
TRIARC COMPANIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended
------------------------------
March 31, March 30,
2002 2003
---- ----
(In Thousands)
(Unaudited)
Cash flows from continuing operating activities:
Net loss..............................................................................$ (1,046) $ (1,974)
Adjustments to reconcile net loss to net cash used in continuing operating activities:
Depreciation and amortization of properties.................................... 1,416 3,059
Amortization of other intangible assets and certain other items................ 165 324
Amortization of deferred financing costs and original issue discount........... 486 451
Collection of litigation settlement receivable................................. 1,667 1,667
Deferred compensation provision ............................................... 924 789
Operating investment adjustments, net (see below).............................. 778 (6,766)
Equity in losses (earnings) of investees, net.................................. 739 (577)
Deferred income tax benefit.................................................... (992) (219)
Other, net..................................................................... (681) 277
Changes in operating assets and liabilities:
Increase in receivables.................................................... (38) (192)
Decrease in inventories.................................................... -- 127
Increase in prepaid expenses and other current assets...................... (496) (231)
Decrease in accounts payable and accrued expenses.......................... (14,982) (17,208)
---------- ----------
Net cash used in continuing operating activities........................ (12,060) (20,473)
---------- ----------
Cash flows from continuing investing activities:
Investment activities, net (see below)................................................ (44,719) 34,540
Capital expenditures.................................................................. (23) (721)
Other................................................................................. 497 (66)
---------- ----------
Net cash provided by (used in) continuing investing activities.......... (44,245) 33,753
---------- ----------
Cash flows from continuing financing activities:
Repayments of long-term debt.......................................................... (5,932) (8,296)
Exercises of stock options............................................................ 1,851 1,692
Transfers from restricted cash equivalents............................................ 124 53
---------- ----------
Net cash used in continuing financing activities........................ (3,957) (6,551)
---------- ----------
Net cash provided by (used in) continuing operations.................................... (60,262) 6,729
Net cash provided by discontinued operations............................................ 290 3,324
---------- ----------
Net increase (decrease) in cash and cash equivalents.................................... (59,972) 10,053
Cash and cash equivalents at beginning of period........................................ 506,461 457,472
---------- ----------
Cash and cash equivalents at end of period..............................................$ 446,489 $ 467,525
========== ==========
Details of cash flows related to investments:
Operating investment adjustments, net:
Proceeds from sales of trading securities........................................$ 14,855 $ 5,919
Cost of trading securities purchased............................................. (11,523) (12,014)
Net recognized losses (gains) from trading securities and short positions in
securities..................................................................... 40 (49)
Other net recognized gains, including a reduction for other than temporary
losses, and equity in investment limited partnerships.......................... (2,621) (729)
Net amortization of premium on debt securities................................... 27 107
---------- ----------
$ 778 $ (6,766)
========== ==========
Investing investment activities, net:
Proceeds from sales and maturities of available-for-sale securities and other
investments....................................................................$ 28,373 $ 47,943
Cost of available-for-sale securities and other investments purchased............ (70,405) (17,759)
Proceeds of securities sold short................................................ 6,414 9,886
Payments to cover short positions in securities.................................. (9,101) (5,530)
---------- ----------
$ (44,719) $ 34,540
========== ==========
See accompanying notes to condensed consolidated financial statements.
TRIARC COMPANIES, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
March 30, 2003
(Unaudited)
(1) Basis of Presentation
The accompanying unaudited condensed consolidated financial statements of
Triarc Companies, Inc. ("Triarc" and, together with its subsidiaries, the
"Company") have been prepared in accordance with Rule 10-01 of Regulation S-X
promulgated by the Securities and Exchange Commission and, therefore, do not
include all information and footnotes necessary for a fair presentation of
financial position, results of operations and cash flows in conformity with
accounting principles generally accepted in the United States of America. 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 29, 2002 and March 30, 2003 and its results of
operations and cash flows for the three-month periods ended March 31, 2002 and
March 30, 2003 (see below). This information should be read in conjunction with
the consolidated financial statements and notes thereto included in the
Company's Annual Report on Form 10-K for the fiscal year ended December 29, 2002
(the "Form 10-K").
The Company reports on a fiscal year basis consisting of 52 or 53 weeks
ending on the Sunday closest to December 31. The Company's first quarter of 2002
commenced on December 31, 2001 and ended on March 31, 2002 and the Company's
first quarter of 2003 commenced on December 30, 2002 and ended on March 30,
2003. The period from December 31, 2001 to March 31, 2002 is referred to herein
as the three-month period ended March 31, 2002 and the period from December 30,
2002 to March 30, 2003 is referred to herein as the three-month period ended
March 30, 2003. Each quarter contained 13 weeks.
Certain amounts included in the accompanying prior periods' condensed
consolidated financial statements have been reclassified to conform with the
current quarter's presentation.
(2) Stock-Based Compensation
The Company measures compensation costs for its employee stock-based
compensation under the intrinsic value method rather than the fair value method.
Accordingly, compensation cost for the Company's stock options is measured as
the excess, if any, of the market price of the Company's common stock at the
date of grant, or at any subsequent measurement date as a result of certain
types of modifications to the terms of its stock options, over the amount an
employee must pay to acquire the stock. Such amounts are amortized as
compensation expense over the vesting period of the related stock options. Any
compensation cost is recognized as expense only to the extent it exceeds
compensation expense previously recognized for such stock options. However, no
stock-based employee compensation expense determined under the intrinsic value
method has been recognized in the reported net loss during the three-month
periods ended March 31, 2002 and March 30, 2003.
A summary of the effect on net loss and net loss per share in each quarter
presented as if the fair value method had been applied to all outstanding and
unvested stock options that were granted commencing January 1, 1995 is as
follows (in thousands except per share data):
Three Months Ended
------------------------------
March 31, March 30,
2002 2003
---- ----
Net loss, as reported.............................................................$ (1,046) $ (1,974)
Recognition of total stock-based employee compensation expense determined
under the fair value method, net of related income taxes........................ (1,471) (1,270)
---------- ----------
Net loss, as adjusted.............................................................$ (2,517) $ (3,244)
========== ==========
Loss per share:
Basic and diluted, as reported..................................................$ (.05) $ (.10)
Basic and diluted, as adjusted.................................................. (.12) (.16)
See Note 14 to the consolidated financial statements contained in the Form 10-K
for disclosure of the adjustments, methods and significant assumptions used to
estimate the fair values of stock options reflected in the table above. The
significant assumptions remain unchanged since there were no stock options
granted by the Company during the three-month periods ended March 31, 2002 and
March 30, 2003.
(3) Acquisition of Sybra
On December 27, 2002, the Company completed the acquisition (the "Sybra
Acquisition") of all of the voting equity interests of Sybra, Inc. ("Sybra")
from I.C.H. Corporation ("ICH") as disclosed in more detail in Note 3 to the
Company's consolidated financial statements contained in the Form 10-K. Sybra
owned and operated 239 Arby's restaurants in nine states as of March 30, 2003
and, prior to the Sybra Acquisition, was the second largest franchisee of Arby's
restaurants.
The allocation of the purchase price of Sybra to the assets acquired and
the liabilities assumed at the date of the Sybra Acquisition is set forth in
Note 3 to the consolidated financial statements contained in the Form 10-K. This
allocation of the purchase price of Sybra is on a preliminary basis and remains
subject to finalization.
Sybra's results of operations and cash flows have been included in the
accompanying condensed consolidated statements of operations and cash flows for
the quarter ended March 30, 2003 but have not been included for the quarter
ended March 31, 2002. However, royalties and franchise and related fee revenues
from Sybra, which are no longer included in the accompanying condensed
consolidated statements of operations and cash flows for the quarter ended March
30, 2003, were included for the quarter ended March 31, 2002.
The following unaudited supplemental pro forma condensed consolidated
summary operating data (the "As Adjusted Data") of the Company for the quarter
ended March 31, 2002 has been prepared by adjusting the historical data as set
forth in the accompanying condensed consolidated statement of operations to give
effect to the Sybra Acquisition as if it had been consummated on December 31,
2001 (in thousands except per share amounts):
As Reported As Adjusted
----------- -----------
Revenues......................................................................$ 22,381 $71,116
Operating profit (loss)....................................................... 1,294 (2,595)
Net loss...................................................................... (1,046) (5,467)
Loss per share:
Basic....................................................................... (.05) (.27)
Diluted..................................................................... (.05) (.27)
The As Adjusted Data is presented for comparative purposes only and does
not purport to be indicative of the Company's actual results of operations had
the Sybra Acquisition actually been consummated on December 31, 2001 or of the
Company's future results of operations.
(4) Comprehensive Loss
The following is a summary of the components of comprehensive loss, net of
income taxes (in thousands):
Three Months Ended
------------------------------
March 31, March 30,
2002 2003
---- ----
Net loss......................................................................$ (1,046) $ (1,974)
Net change in unrealized holding gains or losses on available-for-sale
securities (see below)...................................................... (2,984) 69
Net change in currency translation adjustment................................. 3 6
---------- ----------
Comprehensive loss............................................................$ (4,027) $ (1,899)
========== ==========
The following is a summary of the components of the net change in the
unrealized holding gains or losses on available-for-sale securities included in
other comprehensive loss (in thousands):
Three Months Ended
------------------------------
March 31, March 30,
2002 2003
---- ----
Net change in unrealized appreciation or depreciation of available-for-sale
securities during the period................................................$ (2,718) $ (19)
(Less) plus reclassification of prior period net (appreciation) depreciation
included in net loss....................................................... (1,966) 135
---------- ----------
(4,684) 116
Equity in change in unrealized gain on a retained interest.................... 78 (7)
Equity in change in unrealized gain on available-for-sale securities.......... -- 2
Income tax (provision) benefit................................................ 1,622 (42)
---------- ----------
$ (2,984) $ 69
========== ==========
(5) Discontinued Operations
Prior to 2002 the Company sold (the "Snapple Beverage Sale") the stock of
the companies comprising its former premium beverage and soft drink concentrate
business segments (the "Beverage Discontinued Operations") to affiliates of
Cadbury Schweppes plc ("Cadbury"). Further, prior to 2002 the Company sold the
stock or the principal assets of the companies comprising the former utility and
municipal services and refrigeration business segments (the "SEPSCO Discontinued
Operations") of SEPSCO, LLC, a subsidiary of the Company. The Beverage
Discontinued Operations and the SEPSCO Discontinued Operations have been
accounted for as discontinued operations since their respective dates of sale.
The consideration paid to the Company in the Snapple Beverage Sale
consisted of (1) cash, which is subject to further post-closing adjustment as
described below and (2) the assumption by Cadbury of debt and related accrued
interest. The Snapple Beverage Sale purchase and sale agreement provides for a
post-closing adjustment, the amount of which is in dispute. Cadbury has stated
that it currently believes that it is entitled to receive from the Company a
post-closing adjustment of $23,189,000 plus interest at 7.19% from the October
25, 2000 sale date while the Company, on the other hand, has stated that it
currently believes that no post-closing adjustment is required. The Company is
in arbitration with Cadbury to determine the amount of the post-closing
adjustment, if any. The Company currently expects the arbitration process to be
completed no later than December 29, 2003.
Net current liabilities relating to discontinued operations consisted of
the following (in thousands):
December 29, March 30,
2002 2003
---- ----
Accrued expenses, including accrued income taxes, of the Beverage
Discontinued Operations....................................................$ 30,316 $ 32,453 (a)
Net liabilities of SEPSCO Discontinued Operations (net of assets held
for sale of $234).......................................................... 2,767 2,756
----------- -----------
$ 33,083 $ 35,209
=========== ===========
(a) Increase is principally due to the collection of state income tax
receivables of $3,422,000 less related federal income taxes of
$1,198,000.
(6) Loss Per Share
Basic loss per share for the three-month periods ended March 31, 2002 and
March 30, 2003 has been computed by dividing net loss by the weighted average
number of common shares outstanding of 20,422,000 and 20,413,000, respectively.
Diluted loss per share for the three-month periods ended March 31, 2002 and
March 30, 2003 is the same as the basic loss per share since the Company
reported a net loss and, therefore, the effect of all potentially dilutive
securities on the loss per share would have been antidilutive. The only
remaining Company securities as of March 30, 2003 that could dilute basic income
per share for periods subsequent to March 30, 2003 are the 9,185,088 outstanding
stock options.
(7) Transactions with Related Parties
Prior to 2002 the Company provided incentive compensation of $22,500,000 to
the Chairman and Chief Executive Officer and President and Chief Operating
Officer of the Company (the "Executives") which was invested in two deferred
compensation trusts (the "Deferred Compensation Trusts") for their benefit.
Deferred compensation expense of $924,000 and $789,000 was recognized in the
three-month periods ended March 31, 2002 and March 30, 2003, respectively, for
the increase in the fair value of the investments in the Deferred Compensation
Trusts. Under accounting principles generally accepted in the United States of
America, the Company was not able to recognize any investment income on
unrealized increases in value of the investments in the Deferred Compensation
Trusts during the three-month periods ended March 31, 2002 and March 30, 2003.
However, during the three-month period ended March 30, 2003, the Company sold
one of the investments in the Deferred Compensation Trusts and recognized a
previously unrealized gain of $452,000, which included increases in value prior
to the 2003 first quarter. The cumulative disparity between compensation expense
and recognized investment income will reverse in future periods as either (1)
additional investments in the Deferred Compensation Trusts are sold and
previously unrealized gains are recognized without any offsetting increase in
compensation expense or (2) the fair values of the investments in the Deferred
Compensation Trusts decrease resulting in the recognition of a reduction of
deferred compensation expense without any offsetting losses recognized in
investment income. Recognized gains are included in "Investment income, net" and
deferred compensation expense is included in "General and administrative" in the
accompanying condensed consolidated statements of operations. The obligation to
the Executives is reported as "Deferred compensation payable to related parties"
in the accompanying condensed consolidated balance sheet as of March 30, 2003.
The assets in the Deferred Compensation Trusts which are reflected in the
accompanying condensed consolidated balance sheet as of March 30, 2003 consisted
of $18,171,000 included in "Investments," $4,459,000 included in "Cash and cash
equivalents" and $495,000 included in "Receivables."
The Company received a $5,000,000 interest-bearing note (the "Executives'
Note") from the Executives prior to 2002 as part of a settlement of a class
action lawsuit receivable in three equal installments. The Executives' Note bore
interest at 4.92% during the twelve-month period ended March 31, 2002 and at
1.75% thereafter through maturity. The Company recorded interest income on the
Executives' Note of $40,000 and $7,000 for the three-month periods ended March
31, 2002 and March 30, 2003, respectively. In March of 2002 and 2003 the Company
collected the second and third installments aggregating $3,334,000 on the
Executives' Notes. The Company also collected related interest of $163,000 and
$29,000 during the three-month periods ended March 31, 2002 and March 30, 2003.
As disclosed in more detail in Note 23 ("Note 23") to the consolidated
financial statements contained in the Form 10-K regarding related party
transactions, the Company has provided certain of its management officers and
employees, including its executive officers, the opportunity to co-invest with
the Company in certain investments and made related loans to management prior to
2002. The Company did not enter into any new co-investments subsequent to 2001
and the co-investment policy no longer permits any new loans. During the quarter
ended December 29, 2002, the Company provided an allowance of $176,000 for the
uncollectible non-recourse portion of the notes owed by management in connection
with their co-investments in EBT Holding Company, LLC ("EBT") due to the
worthlessness of the investment owned by EBT. Such non-recourse notes were
subsequently forgiven in March 2003. During the three-month period ended March
30, 2003, the Company collected the remaining $176,000 of the recourse portion
of the notes with respect to EBT and $2,000 of related accrued interest. Under
the Company's co-investment policy, as of March 30, 2003 the Company had in
total $1,994,000 of remaining co-investment notes receivable from management, of
which $997,000 was non-recourse, less a $393,000 remaining allowance for the
uncollectible non-recourse portion of the notes which was also provided during
the quarter ended December 29, 2002. These notes, net of the related allowance,
are included in "Deferred costs and other assets" in the accompanying condensed
consolidated balance sheets.
The Company continues to have additional related party transactions of the
same nature and general magnitude as those described in Note 23 to the
consolidated financial statements contained in the Form 10-K.
(8) Legal and Environmental Matters
In 2001, a vacant property owned by Adams Packing Association, Inc.
("Adams"), an inactive subsidiary of the Company, was listed by the United
States Environmental Protection Agency on the Comprehensive Environmental
Response, Compensation and Liability Information System ("CERCLIS") list of
known or suspected contaminated sites. The CERCLIS listing appears to have been
based on an allegation that a former tenant of Adams conducted drum recycling
operations at the site from some time prior to 1971 until the late 1970's. The
business operations of Adams were sold in December 1992. In February 2003, Adams
and the Florida Department of Environmental Protection (the "FDEP"), agreed to a
consent order that provides for development of a work plan for further
investigation of the site and limited remediation of the identified
contamination. Subsequent to March 30, 2003, the FDEP approved the work plan
submitted by Adams' environmental consultant and work is expected to begin at
the site in the near future. Based on a preliminary cost estimate of
approximately $1,000,000 for completion of the work plan developed by Adams'
environmental consultant, and after taking into consideration various legal
defenses available to the Company, including Adams, Adams has provided for its
estimate of its liability for this matter, including related legal and
consulting fees. Such provision was made primarily during the quarter ended June
30, 2002.
In October 1998, various class action lawsuits were filed on behalf of the
Company's stockholders. Each of these actions names the Company, the Executives
and members of the Company's board of directors as defendants. On March 26,
1999, certain plaintiffs in these actions filed an amended complaint which
alleges that the Company's tender offer statement filed with the Securities and
Exchange Commission in 1999, pursuant to which the Company repurchased 3,805,015
shares of its class A common stock for $18.25 per share, was materially false
and misleading. The amended complaint seeks, among other items, damages in an
unspecified amount. In October 2000, the plaintiffs agreed to stay this action
pending determination of a similar stockholder action which was subsequently
dismissed in October 2002 and is no longer being appealed. Through March 30,
2003, no further action has occurred with respect to these class action
lawsuits.
In addition to the environmental matter and stockholder lawsuit described
above, the Company is involved in other litigation and claims incidental to its
business. Triarc and its subsidiaries have reserves for all of their legal and
environmental matters aggregating $2,600,000 as of March 30, 2003. Although the
outcome of such matters cannot be predicted with certainty and some of these
matters may be disposed of unfavorably to the Company, based on currently
available information, including legal defenses available to Triarc and/or its
subsidiaries, and given the aforementioned reserves, the Company does not
believe that the outcome of its legal and environmental matters will have a
material adverse effect on its consolidated financial position or results of
operations.
(9) Subsequent Events
As disclosed in more detail in Note 23, the Company and certain of its
officers, including entities controlled by them, have invested in Encore Capital
Group, Inc. ("Encore"), an investment accounted for by the Company under the
equity method. The Company and other stockholders of Encore, including the
present and former officers of the Company who have invested in Encore prior to
an initial public offering by Encore of its common stock in July 1999, on a
joint and several basis, had entered into guarantees (the "Bank Guarantees")
and/or certain related agreements to guarantee up to $15,000,000 of revolving
credit borrowings of a subsidiary of Encore. The $15,000,000 revolving credit
line had been scheduled to expire in April 2003. As of Encore's first quarter
ended March 31, 2003, Encore had $1,864,000 of outstanding revolving credit
borrowings. In April 2003, the maturity date for any revolving credit borrowings
was extended until April 15, 2004 but the maximum amount available was reduced
from $15,000,000 to $5,000,000. This effectively reduced the Bank Guarantees to
$5,000,000, of which the Company would be responsible for approximately $600,000
assuming the full $5,000,000 was borrowed and all of the parties, besides the
Company, to the Bank Guarantees and the related agreements fully perform
thereunder. In connection therewith, at March 30, 2003 the Company had
$15,019,000 in an interest-bearing bank custodial account at the financial
institution providing the revolving credit line which was subject to set off
under certain circumstances if the parties to the Bank Guarantees and related
agreements failed to perform their obligations thereunder. The interest-bearing
bank account is included in "Cash and cash equivalents" in the accompanying
condensed consolidated balance sheets. However, such funds were subsequently
withdrawn following the April 2003 extension of the revolving credit line. In
addition, the Company continues to guarantee the obligations under the senior
notes of Encore as disclosed in more detail in Note 23.
TRIARC COMPANIES, INC. AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Introduction
We currently operate in one business, franchising and operating Arby's
restaurants.
On December 27, 2002, we completed the acquisition of Sybra, Inc. in a
transaction we refer to as the Sybra Acquisition. Sybra owned and operated 239
Arby's restaurants in nine states as of March 30, 2003 and, prior to the Sybra
Acquisition, was the second largest franchisee of Arby's restaurants. As a
result of the Sybra Acquisition, our consolidated results of operations and cash
flows for our 2003 first quarter include Sybra's results and cash flows but do
not include royalties and franchise and related fees from Sybra which are
eliminated in consolidation. Our consolidated results of operations and cash
flows for our 2002 first quarter, however, include royalties and franchise and
related fees from Sybra but do not include Sybra's results and cash flows.
Presentation of Financial Information
This "Management's Discussion and Analysis of Financial Condition and
Results of Operations" of Triarc Companies, Inc., which we refer to as Triarc,
and its subsidiaries should be read in conjunction with the accompanying
condensed consolidated financial statements and "Item 7. Management's Discussion
and Analysis of Financial Condition and Results of Operations" in our Annual
Report on Form 10-K for the fiscal year ended December 29, 2002. Item 7 of our
Form 10-K describes the recent trends affecting our restaurant business,
contractual obligations and the application of our critical accounting policies.
Certain statements we make under this Item 2 constitute "forward-looking
statements" under the Private Securities Litigation Reform Act of 1995. See
"Special Note Regarding Forward-Looking Statements and Projections" in "Part II
- - Other Information" preceding "Item 1."
We report on a fiscal year consisting of 52 or 53 weeks ending on the
Sunday closest to December 31. Our first quarter of fiscal 2002 commenced on
December 31, 2001 and ended on March 31, 2002 and our first quarter of fiscal
2003 commenced on December 30, 2002 and ended on March 30, 2003. When we refer
to the "three months ended March 31, 2002" or the "2002 first quarter," we mean
the period from December 31, 2001 to March 31, 2002 and when we refer to the
"three months ended March 30, 2003" or the "2003 first quarter," we mean the
period from December 30, 2002 to March 30, 2003. Each quarter contained 13
weeks.
Certain amounts presented in this "Management's Discussion and Analysis of
Financial Condition and Results of Operations" for the three months ended March
31, 2002 have been reclassified to conform with the current quarter's
presentation.
Results of Operations
Presented below is a table that summarizes our results of operations and
compares the amount and percent of the change between the 2002 first quarter and
the 2003 first quarter. We consider certain percentage changes between these
quarters to be not measurable or not meaningful, and we refer to these as "n/m."
The percentage changes used in the following discussion have been rounded to the
nearest whole percent.
Three Months Ended
---------------------- Change
March 31, March 30, -------------------
2002 2003 Amount Percent
---- ---- ------ -------
(In Millions Except Percents)
Revenues:
Net sales...................................................$ -- $ 48.5 $ 48.5 n/m
Royalties and franchise and related fees (a)................ 22.4 21.2 (1.2) (5)%
---------- --------- --------
22.4 69.7 47.3 n/m
---------- --------- --------
Costs and expenses:
Cost of sales, excluding depreciation and amortization ..... -- 36.2 36.2 n/m
Advertising and selling..................................... -- 3.1 3.1 n/m
General and administrative ................................. 19.5 23.4 3.9 20 %
Depreciation and amortization, excluding amortization of
deferred financing costs ................................. 1.6 3.4 1.8 114%
---------- --------- --------
21.1 66.1 45.0 n/m
---------- --------- --------
Operating profit ....................................... 1.3 3.6 2.3 179%
Interest expense .............................................. (6.4) (8.5) (2.1) (33)%
Insurance expense related to long-term debt.................... (1.1) (1.1) -- -- %
Investment income, net......................................... 6.1 3.1 (3.0) (48)%
Other income (expense), net.................................... (0.6) 0.6 1.2 n/m
---------- --------- --------
Loss before income taxes................................ (0.7) (2.3) (1.6) n/m
(Provision for) benefit from income taxes...................... (0.3) 0.3 0.6 n/m
---------- --------- --------
Net loss................................................$ (1.0) $ (2.0) $ (1.0) n/m
========== ========= ========
(a) Includes royalties from Sybra, Inc. of $1.7 million for the 2002 first
quarter whereas the royalties from Sybra, Inc. of $1.7 million for the
2003 first quarter were eliminated in consolidation.
Net Sales
Our net sales of $48.5 million for the three months ended March 30, 2003
resulted entirely from our operation of the Arby's restaurants acquired in the
Sybra Acquisition.
Royalties and Franchise and Related Fees
Our royalties and franchise and related fees, which were generated entirely
from our restaurant franchising operations, were reduced by $1.2 million, or 5%,
to $21.2 million for the three months ended March 30, 2003 from $22.4 million
for the three months ended March 31, 2002. This reduction reflects that we no
longer include royalties from the restaurants we acquired in the Sybra
Acquisition whereas we included $1.7 million of royalties from Sybra in the 2002
first quarter. Aside from the effect of the Sybra Acquisition, royalties and
franchise and related fees increased $0.5 million in the 2003 first quarter
compared with the 2002 first quarter entirely due to an increase in royalties.
This increase in royalties consisted of a $0.8 million improvement resulting
from the royalties from the 115 restaurants opened since March 31, 2002, with
generally higher than average sales volumes, replacing the royalties from the 56
generally underperforming restaurants closed since March 31, 2002, partially
offset by a $0.3 million decrease due to a 2% decline in same-store sales of
franchised restaurants during the 2003 first quarter compared with the 2002
first quarter.
The 2% decline in the same-store sales of franchised restaurants in the
2003 first quarter followed a 3% decline in the 2002 fourth quarter. We believe
these declines were affected by the adverse effects of worse weather conditions,
price discounting in the quick service restaurant industry, the generally
sluggish economy and strong same-store sales comparisons of the prior years'
comparable quarters. We are continuing Arby's national cable television
advertising and introducing new operational, product and marketing initiatives
which we expect will favorably impact the trend of same-store sales during the
balance of 2003.
Cost of Sales, Excluding Depreciation and Amortization
Our cost of sales, excluding depreciation and amortization, of $36.2
million for the three months ended March 30, 2003 resulted entirely from our
operation of the Arby's restaurants acquired in the Sybra Acquisition.
Our royalties and franchise fees have no associated cost of sales.
Advertising and Selling
Our advertising and selling expenses of $3.1 million for the three months
ended March 30, 2003 resulted entirely from our operation of the Arby's
restaurants acquired in the Sybra Acquisition.
General and Administrative
Our general and administrative expenses increased $3.9 million, principally
as a result of the Sybra Acquisition.
Depreciation and Amortization, Excluding Amortization of Deferred Financing
Costs
Our depreciation and amortization, excluding amortization of deferred
financing costs, increased $1.8 million for the three months ended March 30,
2003 entirely due to depreciation and amortization of Sybra.
Interest Expense
Interest expense increased $2.1 million reflecting $2.4 million of interest
expense of Sybra. Aside from the effect of the Sybra Acquisition, interest
expense decreased $0.3 million, or 4%, due to lower outstanding balances of our
7.44% insured non-recourse securitization notes, which we refer to as the
Securitization Notes.
Investment Income, Net
The following table summarizes and compares the major components of
investment income, net:
Three Months Ended
------------------------
March 31, March 30,
2002 2003 Change
---- ---- ------
(In Millions)
Recognized net gains.........................................$ 2.5 $ 1.0 $ (1.5)
Interest income.............................................. 2.9 2.0 (0.9)
Distributions, including dividends........................... 0.7 0.4 (0.3)
Equity in the earnings of investment limited partnerships.... 0.2 -- (0.2)
Other........................................................ (0.2) (0.3) (0.1)
-------- ------ --------
$ 6.1 $ 3.1 $ (3.0)
======== ====== ========
Our recognized net gains are dependent upon the underlying economics and/or
volatility in the value of our investments in available-for-sale securities and
cost basis investments and/or the timing of the sales of those investments and
may not recur in future periods (see further discussion below). The decrease in
interest income is due to a decline in average rates on our interest-bearing
investments from 1.9% in the 2002 first quarter to 1.4% in the 2003 first
quarter principally due to the general decline in the money market and
short-term interest rate environment.
As of March 30, 2003, we had pretax unrealized holding gains and (losses)
on available-for-sale marketable securities of $1.3 million and $(1.0) million,
respectively, included in accumulated other comprehensive deficit. Should either
(1) we decide to sell any of these investments or (2) any of the unrealized
losses continue such that we believe they have become other than temporary, we
would recognize the gains or losses on the related investments at that time. As
of April 30, 2003, the unrealized holding losses of $1.0 million had increased
to $2.4 million. In addition, through 280 BT Holdings LLC, a 57.4%-owned
consolidated subsidiary, we hold a $1.7 million cost basis investment in
Scientia Health Group Limited, an entity which we refer to as Scientia,
representing original cost less adjustments made in 2002 subsequent to the first
quarter for unrealized losses in investments made by Scientia that were deemed
to be other than temporary. Such amount has been effectively reduced by minority
interests of $0.7 million. In addition, as of March 30, 2003 we have notes
receivable from management officers and employees relating to a portion of their
investments in 280 BT Holdings of which $0.8 million is non-recourse, less an
allowance of $0.4 million for uncollectible amounts. If the value of Scientia
declines further and, accordingly, we recognize additional other than temporary
losses, we would also provide additional allowances relating to the non-recourse
notes receivable in "General and administrative" expenses.
Other Income (Expense), Net
Other income (expense), net, increased $1.2 million principally due to a
$1.3 million improvement in equity in earnings (losses) of Encore Capital Group,
Inc., which we refer to as Encore, from equity in losses of $0.7 million in the
2002 first quarter to equity in earnings of $0.6 million in the 2003 first
quarter. The equity in losses of Encore in the 2002 first quarter reflected
previously unrecorded losses that were recognized upon our investment of $0.9
million in newly-issued convertible preferred stock of Encore. The equity in
these losses had not been recognized prior to the 2002 first quarter since we
had previously reduced our investment in Encore to zero.
Loss Before Income Taxes
Our loss before income taxes increased $1.6 million to $2.3 million for the
three months ended March 30, 2003 from $0.7 million for the three months ended
March 31, 2002 due to the effect of the variances explained in the captions
above.
We recognized $0.9 million in the 2002 first quarter and $0.8 million in
the 2003 first quarter of compensation expense in general and administrative
expenses for the increase in the fair value of investments in two deferred
compensation trusts, which we refer to as the Trusts, in which we invested prior
to 2002 for the benefit of our Chairman and Chief Executive Officer and
President and Chief Operating Officer, whom we refer to as the Executives. Under
accounting principles generally accepted in the United States of America, we
were unable to recognize any investment income on unrealized increases in value
of the investments in the Trusts during the 2002 first quarter and the 2003
first quarter. However, during the 2003 first quarter, we sold one of the
investments in the Trusts and recognized a previously unrealized gain of $0.5
million, which included increases in value prior to the 2003 first quarter,
which is included in our investment income. The cumulative disparity between
compensation expense and recognized investment income will reverse in future
periods as either (1) additional investments in the Trusts are sold and
previously unrealized gains are recognized without any offsetting increase in
compensation expense or (2) the fair values of the investments in the Trusts
decrease resulting in the recognition of a reduction of deferred compensation
expense without any offsetting losses recognized in investment income.
Income Taxes
The benefit from income taxes for the three months ended March 30, 2003
represented a rate of 12% which was lower than the United States Federal
statutory rate of 35% principally due to (1) the effect of non-deductible
compensation costs and (2) state income taxes, net of Federal income tax
benefit, due to the differing mix of pretax income or loss among the
consolidated entities which file state tax returns on an individual company
basis. We had a provision for income taxes for the three months ended March 31,
2002 despite a pretax loss principally due to the impact of the same items on a
lower pretax loss.
Liquidity And Capital Resources
Cash Flows from Continuing Operating Activities
Our consolidated operating activities from continuing operations used cash
and cash equivalents, which we refer to in this discussion as cash, of $20.5
million during the three months ended March 30, 2003 reflecting (1) cash used by
changes in operating assets and liabilities of $17.5 million, (2) net operating
investment adjustments of $6.8 million and (3) a net loss of $2.0 million, all
partially offset by (1) net non-cash charges of $4.1 million and (2) the
collection of a litigation settlement receivable of $1.7 million.
The cash used by changes in operating assets and liabilities of $17.5
million reflected (1) a $9.9 million reduction in accrued compensation and
related benefits principally due to the annual payment of previously accrued
incentive compensation and (2) an $8.3 million reduction of Sybra's accounts
payable and accrued expenses, other than accrued compensation and related
benefits, principally to satisfy a portion of Sybra's net negative working
capital assumed as contemplated as part of the Sybra Acquisition.
The net operating investment adjustments of $6.8 million principally
reflected $6.1 million of net purchases of trading securities in excess of
sales. The net non-cash charges of $4.1 million consisted principally of $3.8
million of depreciation and amortization.
Excluding the effect of any net purchases of trading securities, which
represent the discretionary investment of excess cash and represented $6.1
million of the $20.5 million of cash used in operating activities in the 2003
first quarter, we expect positive cash flows from continuing operating
activities during the remaining nine months of 2003. This is due to our
expectation that the annual payment of incentive compensation impacting the
$17.5 million of cash used in the 2003 first quarter by changes in operating
assets and liabilities discussed above should not recur during the remainder of
2003 and, to an extent, should reverse. However, we continue to expect that our
continuing operating activities will require a net use of cash for the full year
2003 due to the $20.5 million used in the 2003 first quarter partially
reflecting the funding of a portion of Sybra's net negative working capital
assumed in the Sybra Acquisition.
Working Capital and Capitalization
Working capital, which equals current assets less current liabilities, was
$505.6 million at March 30, 2003, reflecting a current ratio, which equals
current assets divided by current liabilities, of 4.3:1. Working capital
decreased $4.8 million from $510.4 million at December 29, 2002 principally due
to the reclassification of long-term debt to current.
Our total capitalization at March 30, 2003 was $711.6 million consisting of
stockholders' equity of $332.7 million and $378.9 million of long-term debt,
including current portion. Our total capitalization decreased $8.2 million from
$719.8 million at December 29, 2002 principally due to (1) repayments of
long-term debt of $8.3 million and (2) our net loss of $2.0 million, both
partially offset by proceeds of $1.7 million from stock option exercises.
Securitization Notes and Sybra Long-Term Debt
We have outstanding, through our ownership of Arby's Franchise Trust,
Securitization Notes with a remaining principal balance of $249.8 million as of
March 30, 2003 which are due no later than December 2020. However, based on
current projections and assuming the adequacy of available funds, as defined
under the indenture for the Securitization Notes, which we refer to as the
Indenture, we currently estimate that we will repay $15.7 million during the
remaining nine months of 2003 with increasing annual payments to $37.4 million
in 2011 in accordance with a targeted principal payment schedule.
We have outstanding, through our ownership of Sybra, leasehold notes,
equipment notes and mortgage notes with total remaining principal balances of
$89.8 million as of March 30, 2003. The leasehold notes have a remaining
principal of $80.5 million and are generally due in equal monthly installments
including interest through 2021, of which $4.4 million is due during the
remaining nine months of 2003. The equipment notes have a remaining principal of
$6.0 million and are generally due in equal monthly installments including
interest through 2009, of which $1.0 million is due during the remaining nine
months of 2003. The mortgage notes have a remaining principal of $3.3 million
and are generally due in equal monthly installments including interest through
2018, of which $0.1 million is due during the remaining nine months of 2003.
The Indenture and the agreements for the leasehold notes and mortgage notes
contain various covenants, the most restrictive of which (1) require periodic
financial reporting, (2) require meeting certain debt service coverage ratio
tests and (3) restrict, among other matters, (a) the incurrence of indebtedness,
(b) certain asset dispositions and (c) the payment of distributions by Arby's
Franchise Trust and Sybra. Arby's Franchise Trust and Sybra were in compliance
with all of these covenants as of March 30, 2003.
As of March 30, 2003, Arby's Franchise Trust had no amounts available for
the payment of distributions. However, on April 21, 2003, $1.5 million relating
to cash flows for the calendar month of March 2003 became available for the
payment of distributions by Arby's Franchise Trust through its parent to Arby's
which, in turn, would be available to Arby's to pay management service fees or
Federal income tax sharing payables to Triarc or, to the extent of any excess,
make distributions to Triarc. Sybra is not permitted to pay any distributions
prior to December 27, 2004.
Other Long-Term Debt
We have a secured bank term loan payable through 2008 with an outstanding
principal amount of $17.5 million as of March 30, 2003, of which $2.4 million is
due during the remaining nine months of 2003. We also have an 8.95% secured
promissory note payable through 2006 with an outstanding principal amount of
$12.9 million as of March 30, 2003, of which $1.5 million is due during the
remaining nine months of 2003.
Our total scheduled long-term debt repayments during the remaining nine
months of 2003 are $25.7 million consisting principally of the $15.7 million
expected to be paid under the Securitization Notes, $5.5 million under Sybra's
leasehold, equipment and mortgage notes, $2.4 million under the secured bank
term loan and $1.5 million under the 8.95% secured promissory note. In addition,
in May 2003 we prepaid $3.2 million of capitalized lease obligations which is
included in current portion of long-term debt as of March 30, 2003.
Guarantees and Commitments
Our wholly-owned subsidiary, National Propane Corporation, retains a less
than 1% special limited partner interest in our former propane business, now
known as AmeriGas Eagle Propane, L.P., which we refer to as AmeriGas Eagle.
National Propane agreed that while it remains a special limited partner of
AmeriGas Eagle, it would indemnify the owner of AmeriGas Eagle for any payments
the owner makes related to the owner's obligations under certain of the debt of
AmeriGas Eagle, aggregating approximately $138.0 million as of March 30, 2003,
if AmeriGas Eagle is unable to repay or refinance such debt, but only after
recourse by the owner to the assets of AmeriGas Eagle. National Propane's
principal asset is an intercompany note receivable from Triarc in the amount of
$50.0 million as of March 30, 2003. We believe it is unlikely that we will be
called upon to make any payments under this indemnity. In August 2001, AmeriGas
Propane, L.P., which we refer to as AmeriGas Propane, purchased all of the
interests in AmeriGas Eagle other than National Propane's special limited
partner interest. Either National Propane or AmeriGas Propane may require
AmeriGas Eagle to repurchase the special limited partner interest. However, we
believe it is unlikely that either party would require repurchase prior to 2009
as either AmeriGas Propane would owe us tax indemnification payments if AmeriGas
Propane required the repurchase or we would accelerate payment of deferred
taxes, which would amount to $42.4 million as of March 30, 2003, associated with
our July 1999 sale of the propane business if National Propane required the
repurchase. In the event the interest is not repurchased prior to 2009, we
estimate our actual related taxes payable to be $3.0 million during the
remaining nine months of 2003 with further payments in 2004 through 2008
reducing the taxes payable in 2009 to approximately $36.0 million.
Triarc guarantees mortgage and equipment notes payable through 2015 of
approximately $41.0 million as of March 30, 2003 related to 355 restaurants sold
by us in 1997. The purchaser of the restaurants also assumed substantially all
of the associated lease obligations which extend through 2031, including all
then existing extension or renewal option periods, although Arby's remains
contingently liable if the purchaser does not make the required future lease
payments. Those lease obligations total approximately $64.0 million as of March
30, 2003, assuming the purchaser has made all scheduled payments through that
date under those lease obligations.
We guarantee up to $6.7 million of senior notes that mature in January 2007
issued by Encore to a major financial institution. The outstanding principal
amount of these notes was $7.2 million as of March 30, 2003. Our guarantee will
be reduced by (1) any repayments of these senior notes, (2) any purchases of
these senior notes by us and (3) the amount of certain investment banking or
financial advisory services fees paid to the financial institution by us, Encore
or another significant stockholder of Encore or any of their affiliates. Some of
our present and former officers, including entities controlled by them, who
collectively owned 15.7% of Encore at the time of Encore's initial public
offering in July 1999, are not parties to this note guarantee and could
indirectly benefit from it.
In addition to the note guarantee, we and other stockholders of Encore,
including our present and former officers referred to above who had invested in
Encore prior to its initial public offering, on a joint and several basis, had
entered into guarantees and/or related agreements to guarantee up to $15.0
million of revolving credit borrowings of a subsidiary of Encore. As of Encore's
first quarter ended March 31, 2003, Encore had $1.9 million of outstanding
revolving credit borrowings. The $15.0 million revolving credit line had been
scheduled to expire in April 2003. In April 2003, the maturity date for any
outstanding borrowings was extended until April 15, 2004, but the maximum amount
available was reduced from $15.0 million to $5.0 million. This effectively
reduced the guarantees to $5.0 million, of which we would be responsible for
approximately $0.6 million assuming the full $5.0 million was borrowed and all
of the parties, besides us, to the guarantees and the related agreements fully
perform thereunder. In connection therewith, at March 30, 2003 we had $15.0
million in an interest-bearing bank custodial account at the financial
institution providing the revolving credit line which was subject to set off
under certain circumstances if the parties to the guarantees and related
agreements failed to perform their obligations thereunder. These funds were
subsequently withdrawn following the April 2003 extension of the revolving
credit line.
Capital Expenditures
Cash capital expenditures amounted to $0.7 million during the 2003 first
quarter. We expect that cash capital expenditures will be approximately $3.0
million for the remaining nine months of 2003, principally for maintenance
capital expenditures for company-owned restaurants, for which there were $0.1
million of outstanding commitments as of March 30, 2003.
Acquisitions and Investments
As of March 30, 2003, we have $641.1 million of cash, cash equivalents and
investments, including $30.6 million of investments classified as non-current
and net of $14.4 million of securities sold with an obligation for us to
purchase included in "Accrued expenses" in our accompanying condensed
consolidated balance sheet. We also had $32.5 million of restricted cash
equivalents including $30.5 million held in a reserve account related to the
Securitization Notes. The cash equivalents and non-current investments include
$22.6 million of investments, at cost, in the Trusts designated to satisfy
deferred compensation. We continue to evaluate strategic opportunities for the
use of our significant cash and investment position, including business
acquisitions, repurchases of Triarc common shares (see "Treasury Stock
Purchases" below) and investments.
Income Taxes
Our Federal income tax returns for years subsequent to 1993 have not been
examined by the Internal Revenue Service. However, should any income taxes or
interest be assessed as the result of any Federal or state examinations for
periods through the October 25, 2000 date of sale of our former beverage
businesses, the purchaser has agreed to pay up to $5.0 million of any resulting
income taxes or associated interest relating to the operations of the former
beverage businesses.
Treasury Stock Purchases
Our management is currently authorized, when and if market conditions
warrant and to the extent legally permissible, to repurchase up to $50.0 million
of our class A common stock through January 18, 2004. We did not repurchase any
shares during the 2003 first quarter and we cannot assure you that we will
repurchase any shares under this program.
Discontinued Operations
The agreement relating to the October 25, 2000 sale of our former beverage
businesses provides for a post-closing adjustment, the amount of which is in
dispute. The purchaser has stated that it currently believes that it is entitled
to receive from us a post-closing adjustment of $23.2 million plus interest at
7.19% from October 25, 2000 while we, on the other hand, have stated that we
currently believe that no post-closing adjustment is required. We are in
arbitration with the purchaser to determine the amount of the post-closing
adjustment, if any. We currently expect the arbitration process to be completed
no later than December 29, 2003.
Cash Requirements
As of March 30, 2003, our consolidated cash requirements for continuing
operations for the remaining nine months of 2003, exclusive of operating cash
flow requirements, consist principally of (1) a maximum of $50.0 million of
payments for repurchases of our class A common stock for treasury under our
current stock repurchase program, (2) scheduled debt principal repayments and
capitalized lease prepayments aggregating $28.9 million, (3) capital
expenditures of approximately $3.0 million and (4) the cost of business
acquisitions, if any. Our consolidated cash requirements relating to
discontinued operations for 2003 consist principally of the post-closing
adjustment, if any, of up to $23.2 million related to the sale of our former
beverage businesses, excluding related accrued interest which will be included
in operating cash flows. We anticipate meeting all of these requirements through
(1) the use of our aggregate $610.5 million of existing cash and cash
equivalents and short-term investments, net of $14.4 million of short-term
investments sold with an obligation for us to purchase and (2) cash flows from
continuing operating activities.
Legal and Environmental Matters
In 2001, a vacant property owned by Adams Packing Association, Inc., an
inactive subsidiary of ours, was listed by the United States Environmental
Protection Agency on the Comprehensive Environmental Response, Compensation and
Liability Information System, which we refer to as CERCLIS, list of known or
suspected contaminated sites. The CERCLIS listing appears to have been based on
an allegation that a former tenant of Adams Packing conducted drum recycling
operations at the site from some time prior to 1971 until the late 1970's. The
business operations of Adams Packing were sold in December 1992. In February
2003, Adams Packing and the Florida Department of Environmental Protection,
which we refer to as the Florida DEP, agreed to a consent order that provides
for development of a work plan for further investigation of the site and limited
remediation of the identified contamination. Subsequent to March 30, 2003 the
Florida DEP approved the work plan submitted by Adams Packing's environmental
consultant and work is expected to begin at the site in the near future. Based
on a preliminary cost estimate of approximately $1.0 million for completion of
the work plan developed by Adams Packing's environmental consultant, and after
taking into consideration various legal defenses available to us, including
Adams Packing, Adams Packing has provided for its estimate of its liability for
this matter, including related legal and consulting fees.
In October 1998, various class action lawsuits were filed on behalf of our
stockholders. Each of these actions names us, the Executives and members of our
board of directors as defendants. On March 26, 1999, certain plaintiffs in these
actions filed an amended complaint which alleges that our tender offer statement
filed with the Securities and Exchange Commission in 1999, pursuant to which we
repurchased 3,805,015 shares of our class A common stock for $18.25 per share,
was materially false and misleading. The amended complaint seeks, among other
items, damages in an unspecified amount. In October 2000, the plaintiffs agreed
to stay this action pending determination of a similar stockholder action which
was subsequently dismissed in October 2002 and is no longer being appealed.
Through March 30, 2003, no further action has occurred with respect to these
class action lawsuits.
In addition to the environmental matter and stockholder lawsuit described
above, we are involved in other litigation and claims incidental to our
business. We and our subsidiaries have reserves for all of our legal and
environmental matters aggregating $2.6 million as of March 30, 2003. Although
the outcome of these matters cannot be predicted with certainty and some of
these matters may be disposed of unfavorably to us, based on currently available
information, including legal defenses available to us and/or our subsidiaries,
and given the aforementioned reserves, we do not believe that the outcome of
these legal and environmental matters will have a material adverse effect on our
consolidated financial position or results of operations.
Seasonality
Our continuing operations are not significantly impacted by seasonality.
However, our restaurant revenues are somewhat lower in our first quarter.
Recently Issued Accounting Pronouncements
In January 2003, the Financial Accounting Standards Board issued
Interpretation No. 46 "Consolidation of Variable Interest Entities," an
interpretation of Accounting Research Bulletin No. 51, "Consolidated Financial
Statements." Variable interest entities, which were formerly referred to as
special purpose entities, are generally entities that either (1) have equity
investors that do not provide significant financial resources for the entity to
sustain its activities or (2) have equity investors without voting rights. Under
Interpretation No. 46 variable interest entities must be consolidated by the
primary beneficiary. The primary beneficiary is generally defined as having the
majority of the risks and rewards of ownership arising from the variable
interest entity. Interpretation No. 46 also requires certain disclosures if a
significant, but not majority, variable interest is held. Interpretation No. 46
already applies for variable interests in entities created or obtained after
January 31, 2003 and in the first fiscal period beginning after June 15, 2003
for variable interests in entities acquired before February 1, 2003. Since we do
not presently have interests in any variable interest entities, the application
of Interpretation No. 46 will not have any immediate effect on our consolidated
financial position or results of operations.
In April 2003, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 149, "Amendment of Statement 133 on
Derivative Instruments and Hedging Activities." Statement 149 amends and
clarifies accounting for derivative instruments, including certain embedded
derivative instruments, and for hedging activities under Statement 133. The
provisions of Statement 149 are generally effective for contracts entered into
or modified after June 30, 2003. Due to the recent release of Statement 149 we
have yet to determine the impact, if any, it will have on us. However, we have
historically not had transactions to which hedge accounting applied and have
only a few derivative instruments. Since the provisions of Statement 149
generally are to be applied prospectively, we do not expect that the adoption of
Statement 149 will have any immediate effect on our consolidated financial
position or results of operations.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
This "Quantitative and Qualitative Disclosures about Market Risk" should be
read in conjunction with "Item 7A. Quantitative and Qualitative Disclosures
about Market Risk" in our annual report on Form 10-K for the fiscal year ended
December 29, 2002. Item 7A of our Form 10-K describes in more detail our
objectives in managing our "Interest Rate Risk" with respect to long-term debt
and our "Foreign Currency Risk," both as referred to below.
Certain statements we make under this Item 3 constitute "forward-looking
statements" under the Private Securities Litigation Reform Act of 1995. See
"Special Note Regarding Forward-Looking Statements and Projections" in "Part II
- - Other Information" preceding "Item 1."
We are exposed to the impact of interest rate changes, changes in the
market value of our investments and, to a lesser extent, foreign currency
fluctuations.
Policies and procedures - In the normal course of business, we employ
established policies and procedures to manage our exposure to changes in
interest rates, changes in the market value of our investments and fluctuations
in the value of foreign currencies using financial instruments we deem
appropriate.
Interest Rate Risk
Our objective in managing our exposure to interest rate changes is to limit
the impact of interest rate changes on earnings and cash flows. We generally use
interest rate caps or interest rate swap agreements on a portion of our
variable-rate debt to limit our exposure to the effects of increases in
short-term interest rates on our earnings and cash flows. We did not enter into
any new interest rate caps or swaps during the 2003 first quarter. As of March
30, 2003, our long-term debt, including current portion, aggregated $378.9
million and consisted of $361.4 million of fixed-rate debt, including $5.6
million of capitalized leases, and $17.5 million of a variable-rate bank loan.
The fair market value of our fixed-rate debt will increase if interest rates
decrease. In addition to our fixed-rate and variable-rate debt, our investment
portfolio includes debt securities that are subject to interest rate risk with
maturities which range from less than ninety days to nearly thirty years. The
fair market value of all of our investments in debt securities will decline if
interest rates increase.
Equity Market Risk
Our objective in managing our exposure to changes in the market value of
our investments is to balance the risk of the impact of these changes on our
earnings and cash flows with our expectations for long-term investment returns.
Our primary exposure to equity price risk relates to our investments in equity
securities, equity derivatives, securities sold with an obligation for us to
purchase and investment limited partnerships and similar investment entities. We
have established policies and procedures governing the type and relative
magnitude of investments we may make. We have a management investment committee
which supervises the investment of certain funds not currently required for our
operations and our board of directors has established certain investment
policies to be followed with respect to the investment of funds.
Foreign Currency Risk
We had no significant changes in our management of, or our exposure to,
foreign currency fluctuations during the 2003 first quarter.
Overall Market Risk
We balance our exposure to overall market risk by investing a portion of
our portfolio in cash and cash equivalents with relatively stable and
risk-minimized returns. We periodically interview and select asset managers to
avail ourselves of higher, but more risk-inherent, returns from the investment
strategies of these managers. We also seek to identify alternative investment
strategies that may earn higher returns with attendant increased risk profiles
for a portion of our investment portfolio. We continue to evaluate whether to
adjust our asset allocations to increase the portion of our investments which
offer the opportunity for higher, but more risk-inherent, returns and lower the
portion of our risk-minimized investments. We periodically review the returns
from each of our investments and may maintain, liquidate or increase selected
investments based on this review and our assessment of potential future returns.
We maintain investment portfolio holdings of various issuers, types and
maturities. As of March 30, 2003 these investments consisted of the following
(in thousands):
Cash equivalents included in "Cash and cash equivalents" on
on accompanying condensed consolidated balance sheet.........$ 463,247
Short-term investments......................................... 157,429
----------
Total cash equivalents and short-term investments........... 620,676
Restricted cash equivalents.................................... 32,470
Non-current investments........................................ 30,610
----------
$ 683,756
==========
Our cash equivalents are short-term, highly liquid investments with
maturities of three months or less when acquired and consisted principally of
money market mutual funds, interest-bearing brokerage and bank accounts with a
stable value and commercial paper of high credit-quality entities. Our
short-term investments included $62.5 million of United States government and
government agency debt securities with maturities ranging from thirteen months
to two years when acquired. The $62.5 million together with our cash equivalents
were highly liquid investments that combined constituted 85% of our total cash
equivalents and short-term investments shown above.
At March 30, 2003 our investments are classified in the following general
types or categories (in thousands):
Carrying Value
At Fair -----------------------
Type At Cost Value (b) Amount Percent
---- ------- -------- ------ -------
Cash equivalents (a)............................$ 463,247 $ 463,247 $ 463,247 68%
Restricted cash equivalents..................... 32,470 32,470 32,470 5%
Securities accounted for as:
Trading securities......................... 21,486 19,446 19,446 3%
Available-for-sale securities.............. 120,727 121,066 121,066 18%
Non-current investments held in deferred
compensation trusts accounted for at cost..... 18,171 21,540 18,171 2%
Other current and non-current investments in
investment limited partnerships and similar
investment entities accounted for at cost..... 23,213 37,546 23,213 3%
Other non-current investments accounted for at:
Cost....................................... 4,891 6,972 4,891 1%
Equity..................................... 895 857 1,252 --
----------- ----------- ---------- ------
Total cash equivalents and long investment
positions.....................................$ 685,100 $ 703,144 $ 683,756 100%
=========== =========== ========== ======
Securities sold with an obligation for us to
purchase accounted for as trading securities..$ (14,326) $ (14,417) $ (14,417) N/A
=========== =========== ==========
(a) Includes $4,459,000 of cash equivalents held in deferred compensation
trusts.
(b) There can be no assurance that we would be able to sell certain of
these investments at these amounts.
Our marketable securities are classified and accounted for either as
"available-for-sale" or "trading" and are reported at fair market value with the
resulting net unrealized holding gains or losses, net of income taxes, reported
as a separate component of comprehensive loss bypassing net loss or included as
a component of net loss, respectively. Investment limited partnerships and
similar investment entities and other non-current investments in which we do not
have significant influence over the investee are accounted for at cost (see
below). Realized gains and losses on investment limited partnerships and similar
investment entities and other non-current investments recorded at cost are
reported as investment income or loss in the period in which the securities are
sold. Other non-current investments in which we have significant influence over
the investee are accounted for in accordance with the equity method of
accounting under which our results of operations include our share of the income
or loss of each of the investees. We review all of our investments in which we
have unrealized losses for any unrealized losses we deem to be other than
temporary. We recognize an investment loss currently for any resulting other
than temporary loss with a permanent reduction in the cost basis component of
the investment. The cost of investments reflected in the table above represents
original cost less unrealized losses that were deemed to be other than
temporary.
Sensitivity Analysis
For purposes of this disclosure, market risk sensitive instruments are
divided into two categories: instruments entered into for trading purposes and
instruments entered into for purposes other than trading. Our measure of market
risk exposure represents an estimate of the potential change in fair value of
our financial instruments. Market risk exposure is presented for each class of
financial instruments held by us at March 30, 2003 for which an immediate
adverse market movement causes a potential material impact on our financial
position or results of operations. We believe that the rates of adverse market
movements described below represent the hypothetical loss to future earnings and
do not represent the maximum possible loss nor any expected actual loss, even
under adverse conditions, because actual adverse fluctuations would likely
differ. In addition, since our investment portfolio is subject to change based
on our portfolio management strategy as well as market conditions, these
estimates are not necessarily indicative of the actual results which may occur.
The following tables reflect the estimated effects on the market value of
our financial instruments as of March 30, 2003 based upon assumed immediate
adverse effects as noted below (in thousands):
Trading Purposes:
Carrying Equity
Value Price Risk
----- ----------
Equity securities............................................................$ 19,446 $ (1,945)
Securities sold with an obligation to purchase............................... (14,417) 1,442
The sensitivity analysis of financial instruments held for trading purposes
assumes an instantaneous 10% decrease in the equity markets in which we are
invested from their levels at March 30, 2003 with all other variables held
constant. The securities included in the trading portfolio do not include any
investments denominated in foreign currency and, accordingly, there is no
foreign currency risk.
Other Than Trading Purposes:
Carrying Interest Equity Foreign
Value Rate Risk Price Risk Currency Risk
----- --------- ---------- -------------
Cash equivalents....................................$ 463,247 $ (27) $ -- $ --
Restricted cash equivalents......................... 32,470 -- -- --
Available-for-sale United States government
and government agency debt securities............ 62,523 (261) -- --
Available-for-sale corporate debt securities........ 8,730 (20) -- (174)
Available-for-sale asset-backed securities.......... 23,602 (2,203) -- --
Available-for-sale equity securities................ 17,814 -- (1,781) --
Available-for-sale debt mutual fund................. 8,397 (126) -- --
Other investments................................... 47,527 (1,257) (2,844) (76)
Long-term debt, excluding capitalized lease
obligations...................................... 373,366 (16,247) -- --
Interest rate swap agreement in a payable position.. 1,174 (410) -- --
The sensitivity analysis of financial instruments held at March 30, 2003
for purposes other than trading assumes (1) an instantaneous change in market
interest rates of one percentage point, (2) an instantaneous 10% decrease in the
equity markets in which we are invested and (3) an instantaneous 10% decrease in
the foreign currency exchange rates versus the United States dollar, each from
their levels at March 30, 2003 and with all other variables held constant. The
sensitivity analysis also assumes that the decreases in the equity markets and
foreign exchange rates are other than temporary. For purposes of this analysis,
our debt investments were assumed to have average remaining maturities as set
forth below. Our cash equivalents consisted of $441.0 million of money market
funds and interest-bearing brokerage and bank accounts which are designed to
maintain a stable value and, as a result, were assumed to have no interest rate
risk and $22.2 million of commercial paper with maturities of three months or
less when acquired which were assumed to have an average remaining maturity of
45 days. Our restricted cash equivalents were invested in money market funds and
are assumed to have no interest rate risk since those funds are designed to
maintain a stable value. Our United States government and government agency debt
securities consisted of several securities with maturities ranging from thirteen
months to two years when acquired and had an average remaining maturity of five
months. Our corporate debt securities consisted of short-term commercial paper
and foreign corporate convertible debt and had an average remaining maturity of
85 days. Our asset-backed securities had expected maturities ranging from two
years to thirty years when acquired and had an average remaining maturity of
nine and one-third years. Our debt mutual fund had underlying investments with
an average duration of one and one-half years and, accordingly, was assumed to
have an average remaining maturity of one and one-half years. Our other
investments, principally investment limited partnerships and similar investment
entities, included debt securities for which we assumed an average remaining
maturity of ten years. The interest rate risk reflects, for each of these debt
investments, the impact on our results of operations. At the time these
securities mature and, assuming we reinvest in similar securities, the effect of
the interest rate risk of one percentage point above their levels at March 30,
2003 would continue beyond the maturities assumed.
The interest rate risk presented with respect to our long-term debt,
excluding capitalized lease obligations, relates only to our fixed-rate debt and
represents the potential impact the indicated change has on the fair value of
this debt and not on our financial position or our results of operations. The
fair value of our variable-rate debt approximates the carrying value since the
floating interest rate resets monthly. However, we have an interest rate swap
agreement but with an embedded written call option on our variable-rate debt. As
interest rates decrease, the fair market values of the interest rate swap
agreement and the written call option both decrease, but not necessarily by the
same amount. The interest rate risk presented with respect to the interest rate
swap agreement represents the potential impact the indicated change has on the
net fair value of the swap agreement and embedded written call option and on our
financial position and results of operations.
For investments in investment limited partnerships and similar investment
entities accounted for at cost and other non-current investments which trade in
public markets or are convertible into securities which trade in public markets
included in "Other investments" in the table above, the sensitivity analysis
assumes the investment mix for each such investment between equity versus debt
securities and securities denominated in United States dollars versus foreign
currencies generally was unchanged since December 29, 2002 since more current
information was not available. To the extent such entities invest in convertible
bonds which trade primarily on the conversion feature of the securities rather
than on the stated interest rate, this analysis assumed equity price risk and no
interest rate risk. Further, this analysis assumed no market risk for other
investments, other than investment limited partnerships and similar investment
entities and other non-current investments which trade in public equity markets.
The foreign currency risk presented excludes those investments where the
investment manager has fully hedged the risk.
TRIARC COMPANIES, INC. AND SUBSIDIARIES
Item 4. Controls and Procedures
Our management, including our Chairman and Chief Executive Officer and our
Chief Financial Officer, evaluated the effectiveness of our disclosure controls
and procedures within 90 days prior to the filing date of this quarterly report.
Based upon that evaluation, our Chairman and Chief Executive Officer and Chief
Financial Officer concluded that our disclosure controls and procedures are
effective to ensure that information required to be included in the reports we
file or submit under the Securities Exchange Act of 1934 is recorded, processed,
summarized and reported as and when required. No significant changes were made
to our internal controls or in other factors that could significantly affect
these controls subsequent to the date of their evaluation.
Part II. OTHER INFORMATION
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS AND PROJECTIONS
This Quarterly Report on Form 10-Q contains or incorporates by reference
certain statements that are not historical facts, including, most importantly,
information concerning possible or assumed future results of operations of
Triarc Companies, Inc. and its subsidiaries (collectively "Triarc" or the
"Company") and those statements preceded by, followed by, or that include the
words "may," "believes," "expects," "anticipates," or the negation thereof, or
similar expressions, that constitute "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995 (the "Reform
Act"). All statements which address operating performance, events or
developments that are expected or anticipated to occur in the future, including
statements relating to revenue growth, earnings per share growth or statements
expressing general optimism about future operating results, are forward-looking
statements within the meaning of the Reform Act. These forward-looking
statements are based on our current expectations, speak only as of the date of
this Form 10-Q and are susceptible to a number of risks, uncertainties and other
factors. Our actual results, performance and achievements may differ materially
from any future results, performance or achievements expressed or implied by
such forward-looking statements. For those statements, we claim the protection
of the safe-harbor for forward-looking statements contained in the Reform Act.
Many important factors could affect our future results and could cause those
results to differ materially from those expressed in the forward-looking
statements contained herein. Such factors include, but are not limited to, the
following:
o Competition, including pricing pressures, the potential impact of
competitors' new units on sales by Arby's(R) restaurants and
consumers' perceptions of the relative quality, variety and value
of the food products offered;
o Success of operating initiatives;
o Development and operating costs;
o Advertising and promotional efforts;
o Brand awareness;
o The existence or absence of positive or adverse publicity;
o Market acceptance of new product offerings;
o New product and concept development by competitors;
o Changing trends in consumer tastes and preferences (including
changes resulting from health or safety concerns with respect to
the consumption of beef, french fries or other foods or the
effects of food-borne illnesses) and in spending and demographic
patterns;
o The business and financial viability of key franchisees;
o Availability, location and terms of sites for restaurant development by
the Company and its franchisees;
o The ability of franchisees to open new restaurants in accordance
with their development commitments, including the ability of
franchisees to finance restaurant development;
o Delays in opening new restaurants or completing remodels;
o Anticipated and unanticipated restaurant closures by the Company and
its franchisees;
o The ability to identify, attract and retain potential franchisees
with sufficient experience and financial resources to develop and
operate Arby's restaurants;
o Changes in business strategy or development plans;
o Quality of the Company's and franchisees' management;
o Availability, terms and deployment of capital;
o Business abilities and judgment of the Company's and franchisees'
personnel;
o Availability of qualified personnel to the Company and to franchisees;
o Labor and employee benefit costs;
o Availability and cost of energy, raw materials, ingredients and
supplies;
o The potential impact that interruptions in the distribution of
supplies of food and other products to Arby's restaurants could
have on sales at Company-owned restaurants and the royalties that
the Company receives from franchisees;
o Availability and cost of workers' compensation and general liability
premiums and claims experience;
o Changes in national, regional and local economic, business or
political conditions in the countries and other territories in
which the Company and its franchisees operate;
o Changes in government regulations, including franchising laws,
accounting standards, environmental laws, minimum wage rates and
taxation requirements;
o The costs, uncertainties and other effects of legal, environmental and
administrative proceedings;
o The impact of general economic conditions on consumer spending,
including a slower consumer economy, and the effects of war or
terrorist activities;
o Adverse weather conditions; and
o Other risks and uncertainties referred to in Triarc's Annual
Report on Form 10-K for the fiscal year ended December 29, 2002
(see especially "Item 1. Business - Risk Factors" and "Item 7.
Management's Discussion and Analysis of Financial Condition and
Results of Operations") and in our other current and periodic
filings with the Securities and Exchange Commission, all of which
are difficult or impossible to predict accurately and many of
which are beyond our control.
We will not undertake and specifically decline 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. In
addition, it is our policy generally not to make any specific projections as to
future earnings, and we do not endorse any projections regarding future
performance that may be made by third parties.
Item 1. Legal Proceedings
As discussed in our Annual Report on Form 10-K for the fiscal year ended
December 29, 2002 (the "Form 10-K"), in 2001 a vacant property owned by our
indirect subsidiary, Adams Packing Association, Inc., was listed by the U.S.
Environmental Protection Agency on the Comprehensive Environmental Response,
Compensation and Liability Information System ("CERCLIS") list of known or
suspected contaminated sites. The CERCLIS listing appears to have been based on
an allegation that a former tenant of Adams Packing conducted drum recycling
operations at the site from some time prior to 1971 until the late 1970's. The
business operations of Adams Packing were sold in December 1992. In February
2003, Adams Packing and the Florida Department of Environmental Protection
("FDEP") agreed to a consent order that provides for development of a work plan
for further investigation of the site and limited remediation of the identified
contamination. In May 2003, the FDEP approved the work plan submitted by Adams
Packing's environmental consultant and work is expected to begin at the site in
the near future. Based on a preliminary cost estimate of approximately $1.0
million for completion of the work plan, developed by Adams Packing's
environmental consultant, and Adams Packing's current reserve levels, and after
taking into consideration various legal defenses available to us and/or Adams
Packing, the cost of further investigation and remediation at the site is not
expected to have a material adverse effect on our consolidated financial
position or results of operations.
Item 5. Other Events
Stock Repurchase Program
------------------------
On January 18, 2001, our management was authorized, when and if market
conditions warrant, and to the extent legally permissible, to purchase from time
to time up to an aggregate of $50 million of our Class A Common Stock pursuant
to a $50 million stock repurchase program that was scheduled to end on January
18, 2003. In January 2003, the term of the stock repurchase program was extended
until January 18, 2004 and the amount available under the stock repurchase
program was replenished to permit the Company to repurchase a total of $50
million worth of our Class A Common Stock on or after January 18, 2003 (in
addition to the $10.5 million previously spent under the program). Triarc has
not repurchased any shares of Class A Common Stock pursuant to the stock
repurchase program since January 18, 2003. We cannot assure you that we will
repurchase any additional shares pursuant to this stock repurchase program.
Item 6. Exhibits and Reports on Form 8-K
(b) Report on Form 8-K
The Registrant furnished a report on Form 8-K on March 27, 2003, which
included information under Item 9 of such form.
The Registrant filed a report on Form 8-K on March 27, 2003, which
included information under Item 7 of such form.
The Registrant furnished a report on Form 8-K on February 18, 2003, which
included information under Item 9 of such form.
The Registrant filed a report on Form 8-K on January 21, 2003, which
included information under Item 7 of such form.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TRIARC COMPANIES, INC.
(Registrant)
Date: May 12, 2003 By: /S/ FRANCIS T. MCCARRON
-----------------------------------
Francis T. McCarron
Senior Vice President and
Chief Financial Officer
(On behalf of the Company)
Date: May 12, 2003 By: /S/ FRED H. SCHAEFER
-----------------------------------
Fred H. Schaefer
Senior Vice President and
Chief Accounting Officer
(Principal Accounting Officer)
CERTIFICATIONS
I, Nelson Peltz, the Chairman and Chief Executive Officer of Triarc
Companies, Inc., certify that:
1. I have reviewed this quarterly report on Form 10-Q of Triarc Companies,
Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: May 12, 2003
/S/ NELSON PELTZ
------------------------------------
Nelson Peltz
Chairman and Chief Executive Officer
CERTIFICATIONS
I, Francis T. McCarron, the Senior Vice President and Chief Financial
Officer of Triarc Companies, Inc., certify that:
1. I have reviewed this quarterly report on Form 10-Q of Triarc Companies,
Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: May 12, 2003
/S/ FRANCIS T. MCCARRON
------------------------------------
Francis T. McCarron
Senior Vice President and
Chief Financial Officer
Exhibit Index
Exhibit
No. Description Page No.
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