UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report: March 11, 2004
(Date of earliest event reported)
TRIARC COMPANIES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 1-2207 38-0471180
(State or other (Commission (I.R.S. Employer
jurisdiction of File No.) Identification No.)
incorporation of
organization)
280 Park Avenue, New York, NY 10017
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: (212) 451-3000
Item 12. Results of Operations and Financial Condition.
On March 11, 2004, Triarc Companies, Inc. issued a press release announcing
the results of operations for its fiscal year and fourth quarter ended December
28, 2003. A copy of the press release is attached to this Current Report on Form
8-K as Exhibit 99.1 and is incorporated herein solely for purposes of this Item
12.
The information in this Current Report on Form 8-K, including the exhibit,
is furnished pursuant to Item 12 and shall not be deemed "filed" for the
purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise
subject to the liabilities under that Section. Furthermore, the information in
this Current Report on Form 8-K, including the exhibit, shall not be deemed to
be incorporated by reference into the filings of Triarc Companies, Inc. under
the Securities Act of 1933.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
TRIARC COMPANIES, INC.
By: /s/ Stuart I. Rosen
-------------------------------
Stuart I. Rosen
Senior Vice President and
Associate General Counsel
Dated: March 11, 2004
EXHIBIT INDEX
Exhibit Description Page No.
------- ----------- --------
99.1 Press release of Triarc Companies, Inc.
dated March 11, 2004
Exhibit 99.1
For Immediate Release
CONTACT: Anne A. Tarbell
(212) 451-3030
www.triarc.com
TRIARC REPORTS FULL YEAR AND FOURTH QUARTER 2003 RESULTS
New York, NY, March 11, 2004 - Triarc Companies, Inc. (NYSE: TRY; TRY.B)
announced today the results of operations for its fiscal year and fourth quarter
ended December 28, 2003.
Highlights
o Consolidated revenues increased to $293.6 million in the 2003 fiscal year
($74.5 million in the 2003 fourth quarter) from $97.8 million in the 2002 fiscal
year ($24.9 million in the 2002 fourth quarter) primarily reflecting net sales
from the company-owned restaurants acquired in the December 2002 purchase of
Sybra, Inc. ("Sybra"). Net sales from the acquired restaurants were $201.5
million in the 2003 fiscal year ($50.5 million in the 2003 fourth quarter).
o Consolidated revenues in both periods were positively impacted by
royalties from 121 franchised restaurants opened since December 29, 2002, with
generally higher than average sales volumes replacing the royalties from 71
generally underperforming franchised restaurants closed since December 29, 2002.
o Offsetting the above was the elimination upon consolidation of royalties
from restaurants acquired in the purchase of Sybra of $7.1 million in the 2003
fiscal year ($1.8 million in the 2003 fourth quarter) and a decline in same
store sales of franchised restaurants.
o 2003 fiscal year and 2003 fourth quarter consolidated operating results
were impacted by a $(22.0) million non-cash goodwill impairment charge at our
subsidiary Sybra, which currently owns and operates approximately 235 Arby's
restaurants, which we purchased at year-end 2002. The goodwill impairment charge
at Sybra was recorded in accordance with Statement of Financial Accounting
Standards No. 142, "Goodwill and Other Intangible Assets," was based upon an
analysis of expected cash flows for Sybra, reflecting increased competition and
higher than expected beef costs, and was independent of our strategic reasons
for owning restaurants. Although we operate our restaurant business as one
segment, Arby's, Inc. and Sybra are considered separately under SFAS 142 when
evaluating goodwill. The Sybra transaction was a strategic acquisition that we
believe will strengthen and increase the value of the Arby's brand. The Sybra
stores provide Arby's with test markets for its new products and remodeling
initiatives. We are also evaluating the longer-term benefits of investing in the
Sybra restaurants and selectively re-franchising them to both new and existing
franchisees that, in turn, could result in new development agreements. Our goal
is to increase the value of Arby's so as to enhance Triarc stockholder value.
o Consolidated operating profit (loss) decreased to a loss of $(1.2)
million in the 2003 fiscal year ($(15.8) million in the 2003 fourth quarter)
compared with a profit of $15.3 million in the 2002 fiscal year ($6.3 million in
the 2002 fourth quarter), principally reflecting the effect of a $(22.0) million
non-cash goodwill impairment charge at Sybra which offset an otherwise positive
contribution to operating profit by company-owned restaurants of $5.7 million in
the 2003 fiscal year (breakeven in the 2003 fourth quarter). Aside from the
overall effect of the Sybra acquisition, also affecting the comparison were $1.7
million of higher royalties and franchise and related fees in the 2003 fiscal
year ($0.9 million in the 2003 fourth quarter) and an increase of $2.3 million
in general and administrative expenses ($0.8 million in the 2003 fourth
quarter). The increase in general and administrative expenses for the 2003
fiscal year principally reflects higher non-cash compensation expense related to
the increase in value of investments under a deferred compensation plan for
which the related unrealized investment income is deferred and a severance
charge, with the severance charge affecting the fourth quarter comparison.
o Excluding the $(22.0) million goodwill impairment charge, consolidated
operating profit increased to $20.8 million in the 2003 fiscal year ($6.2
million in the 2003 fourth quarter) from $15.3 million in the 2002 fiscal year
($6.3 million in the 2002 fourth quarter), reflecting the factors discussed
above. We are excluding the effect of the goodwill impairment charge to provide
another measure of operating profit as we believe that the presentation of this
information, excluding the impairment charge, provides additional, useful
information to investors in assessing trends in our consolidated operations.
o Our restaurant business posted an operating profit of $44.7 million in
the 2003 fiscal year (loss of $(6.4) million in the 2003 fourth quarter) versus
a profit of $59.6 million in the 2002 fiscal year (profit of $15.3 million in
the 2002 fourth quarter), principally reflecting the effect of the goodwill
impairment charge at Sybra which offset the otherwise positive contribution by
the company-owned restaurants in fiscal 2003 (breakeven for the 2003 fourth
quarter) as discussed above. Aside from the overall effect of the Sybra
acquisition, also affecting the comparison of operating profit (loss) were the
change in royalties and franchise and related fees and the severance charge
noted above.
o Excluding the $(22.0) million goodwill impairment charge, operating
profit of our restaurant operations increased to $66.7 million in the 2003
fiscal year ($15.6 million in the 2003 fourth quarter) from $59.6 million in the
2002 fiscal year ($15.3 million in the 2002 fourth quarter), reflecting the
factors discussed above. We are excluding the effect of the goodwill impairment
charge to provide another measure of operating profit as we believe that the
presentation of this information, excluding the impairment charge, provides
additional, useful information to investors in assessing trends in our
restaurant operations.
o Consolidated depreciation and amortization increased to $14.1 million in
the 2003 fiscal year ($3.9 million in the 2003 fourth quarter) from $6.5 million
in the 2002 fiscal year ($1.7 million in the 2002 fourth quarter). Consolidated
depreciation and amortization includes depreciation and amortization of our
restaurant operations that increased to $8.5 million in the 2003 fiscal year
($2.4 million in the 2003 fourth quarter) from $1.0 million in the 2002 fiscal
year ($0.3 million in the 2002 fourth quarter) as a result of the Sybra
acquisition.
o Consolidated interest expense increased to $37.2 million in the 2003
fiscal year ($9.4 million in the 2003 fourth quarter) from $26.2 million in the
2002 fiscal year ($6.2 million in the 2002 fourth quarter), reflecting the
inclusion of approximately $98 million of Sybra debt as of the beginning of 2003
and $175 million of Triarc 5% convertible notes due 2023 issued in May 2003, the
effects of which were partially offset by lower balances of the Arby's
securitization debt.
o Consolidated net investment income increased to $17.3 million in the 2003
fiscal year ($6.4 million in the 2003 fourth quarter) from $0.9 million in the
2002 fiscal year ($0.1 million in the 2002 fourth quarter), due to the
recognition of net gains from investments in the 2003 periods, partially offset
by lower interest income in the 2003 periods primarily reflecting lower
available yields on cash equivalents and short-term debt instruments, as well as
the effect of several investment writedowns recorded in the 2002 periods,
reflecting then weak financing and stock market conditions.
o 2003 fiscal year and 2003 fourth quarter results included a $5.8 million
gain related to the October 2003 sale in a public offering of Encore Capital
Group Inc. (NASDAQ: ECPG) Common Stock. As of December 28, 2003, the Company had
a 9.1% strategic interest in Encore, a financial services company specializing
in the collection, restructuring and resale of consumer receivable portfolios
acquired at a discount from their face value.
o 2003 fiscal year results included a consolidated gain related to proposed
business acquisitions not consummated of $2.1 million versus a loss of $(2.2)
million in fiscal year 2002.
o 2003 fiscal year and 2003 fourth quarter results included a $2.2 million
after-tax gain from discontinued operations principally related to the
settlement of a post-closing sales price adjustment associated with the October
2000 sale of Snapple Beverage Group to Cadbury Schweppes plc. The 2002 fiscal
year and 2002 fourth quarter results included an $11.1 million after-tax gain
from discontinued operations related to adjustments to the previously recognized
gain on the Snapple Beverage Group sale.
o Consolidated net income (loss) was $(10.8) million, or $(0.18) per Class
A and Class B share, in the 2003 fiscal year ($(7.9) million, or $(0.13) per
Class A and Class B share, in the 2003 fourth quarter) compared to $1.3 million,
or $0.02 per Class A and Class B share, in the 2002 fiscal year ($12.5 million,
or $0.20 per Class A and Class B share, in the 2002 fourth quarter). These
changes reflect the factors discussed above. In addition, the per share amounts
discussed above give effect to the Company's September 2003 stock distribution
of two shares of Class B Common Stock, Series 1, for each share of Class A
Common Stock.
o Systemwide same store sales were down (2.3)% in the 2003 fiscal year
(flat in the 2003 fourth quarter) versus an increase of 2.1% in the 2002 fiscal
year ((3.3)% decline in the 2002 fourth quarter), reflecting the adverse effects
in 2003 of restaurant industry discounting and an increasingly competitive
environment as well as strong same store sales comparisons for the 2002 first
nine months. We expect systemwide same store sales to be positive in the 2004
fiscal year.
o In the 2003 fiscal year, the Arby's(R) system opened 121 new units (53 in
the 2003 fourth quarter) and closed 74 generally underperforming units (22 in
the 2003 fourth quarter). 2003 fiscal year average unit volume for all domestic
units decreased approximately (1.3)% from fiscal year 2002. As of December 28,
2003, Arby's had commitments from franchisees to build 468 new units through
2011.
o In August 2003, our board approved a dividend of two shares of newly
designated Class B Common Stock, Series 1, for each share of our Class A Common
Stock. The stock dividend was distributed on September 4, 2003 to all holders of
record as of August 21, 2003.
o In the 2003 fiscal year, we began, for the first time, to pay a quarterly
dividend on our common stock. Also, in the 2003 fiscal year, we repurchased
approximately 1.6 million shares of our Class A Common Stock, for approximately
$43 million, pursuant to our $50 million stock repurchase program, which we then
replenished in full and amended to also permit the repurchase of our Class B
Common Stock, Series 1.
Commenting on corporate developments, Nelson Peltz, Triarc's Chairman and
Chief Executive Officer, said: "As we look ahead, we believe that the actions we
took in 2003 of seizing opportunities in the capital markets, improving our
financial flexibility and resources, adding talent to our corporate team and
remaining disciplined in our acquisition strategies have positioned us well for
the future. We believe we can build substantially more stockholder value at
Triarc."
Commenting on recent operating management changes, Peltz added, "In
December 2003, we announced that Doug Benham would become President and Chief
Executive Officer of Arby's in early January 2004. Doug has been an important
force in the Arby's system for a long time. He brings a wealth of operating and
financial experience to our organization and we are confident that the Arby's
restaurant system will greatly benefit from Doug's leadership."
Discussing restaurant operations, Peter May, Triarc's President and Chief
Operating Officer, said: "Industry discounting and increasing competition
combined to depress results at Arby's in 2003. In 2004, Doug Benham and his team
will be building new product development resources and adding several new and
appealing products, including salads and low carbohydrate offerings. They will
also be focusing on expanding Arby's unit development pipeline, improving its
advertising effectiveness and continuing to work with the franchisees in growing
the brand in an increasingly competitive industry."
Triarc is a holding company and, through its subsidiaries, the franchisor
of the Arby's restaurant system and the operator of approximately 235
restaurants located in the United States.
# # #
Notes and Table To Follow
NOTES TO PRESS RELEASE
1. Systemwide same store sales represent sales at all company-owned and all
franchised stores. We believe that reviewing the increase or decrease in
systemwide same store sales compared with the same period in the prior year is
useful to investors in analyzing the growth of the Arby's brand and assessing
trends in our restaurant operations.
2. Average unit volume is calculated using sales from all domestic
company-owned and all domestic franchised restaurants that have been open a full
twelve months or more. We believe that reviewing the increase or decrease in
average unit volume compared with the same period in the prior year is useful to
investors in analyzing the growth of the Arby's brand and assessing trends in
our restaurant operations.
3. Although we currently intend to continue to declare and pay regular
quarterly dividends, there can be no assurance that any dividends will be
declared or paid in the future or the amount or timing of such dividends, if
any. Future dividends will be made at the discretion of our Board of Directors
and will be based on such factors as our earnings, financial condition, cash
requirements, future prospects and other factors.
4. There can be no assurance that we will be able to identify appropriate
acquisition targets or that we will be able to successfully integrate any future
acquisitions into our existing operations. In addition, there can be no
assurance that any share repurchases will be made in the future or that any such
repurchases or acquisitions will result in additional stockholder value.
5. The statements in this press release 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 statements preceded by, followed
by, or that include the words "may," "believes," "expects," "anticipates" or the
negation thereof, or similar expressions, constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995 (the "Reform Act"). All statements that 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 press release 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: competition, including pricing
pressures, the potential impact of competitors' new units on sales by Arby's
restaurants and consumers' perceptions of the relative quality, variety and
value of the food products offered; success of operating initiatives;
development costs; advertising and promotional efforts; brand awareness; the
existence or absence of positive or adverse publicity; new product and concept
development by the Company and its competitors, and market acceptance of such
new product offerings and concepts; changes in consumer tastes and preferences,
including changes resulting from concerns over nutritional or safety aspects of
beef, poultry, french fries or other foods or the effects of food-borne
illnesses such as "mad cow disease" and avian influenza, or "bird flu"; changes
in spending patterns and demographic trends; the business and financial
viability of key franchisees; the timely payment of franchisee obligations due
to the Company; availability, location and terms of sites for restaurant
development by the Company and its franchisees; the ability of franchisees to
open new restaurants in accordance with their development commitments, including
the ability of franchisees to finance restaurant development; delays in opening
new restaurants or completing remodels; anticipated or unanticipated restaurant
closures by the Company and its franchisees; the ability to identify, attract
and retain potential franchisees with sufficient experience and financial
resources to develop and operate Arby's restaurants; changes in business
strategy or development plans, and the willingness of franchisees to participate
in the Company's strategy; business abilities and judgment of the Company's and
franchisees' management and other personnel; availability of qualified
restaurant personnel to the Company and to franchisees; availability, terms
(including changes in interest rates) and deployment of capital; changes in
commodity (including beef), labor, supplies and other operating costs and
availability and cost of insurance; the Company's ability, if necessary, to
secure alternative distribution of supplies of food, equipment and other
products to Arby's restaurants at competitive rates and in adequate amounts, and
the potential financial impact of any interruptions in such distribution;
changes in national, regional and local economic, market, business or political
conditions in the countries and other territories in which the Company and its
franchisees operate; changes in government regulations, including franchising
laws, accounting standards, environmental laws, minimum wage rates and taxation
rates; the costs, uncertainties and other effects of legal, environmental and
administrative proceedings; the impact of general economic conditions on
consumer spending, including a slower consumer economy and the effects of war or
terrorist activities; adverse weather conditions; our ability to identify
appropriate acquisition targets in the future and to successfully integrate any
future acquisitions into our existing operations; and other risks and
uncertainties affecting the Company detailed in the Company's 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 results of any revisions that 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.
Triarc Companies, Inc.
Condensed Consolidated Statements of Operations (a)
Fourth Quarter and Fiscal Year Ended December 29, 2002 and December 28, 2003
Fourth Quarter Fiscal Year
---------------------- ------------------------
2002 2003 2002 2003
---- ---- ---- ----
(In thousands except per share amounts)
Revenues:
Net sales $ -- $ 50,496 $ -- $ 201,484
Royalties and franchise and related fees (b) 24,893 23,955 97,782 92,136
--------- --------- --------- ----------
24,893 74,451 97,782 293,620
--------- --------- --------- ----------
Costs and expenses:
Cost of sales, excluding depreciation and amortization -- 39,473 -- 151,612
Advertising and selling 763 4,560 2,948 16,115
General and administrative 16,143 20,362 72,945 91,043
Depreciation and amortization, excluding
amortization of deferred financing costs 1,690 3,875 6,550 14,051
Goodwill impairment -- 22,000 -- 22,000
--------- --------- --------- ----------
18,596 90,270 82,443 294,821
--------- --------- --------- ----------
Operating profit (loss) 6,297 (15,819) 15,339 (1,201)
Interest expense (6,208) (9,368) (26,210) (37,225)
Insurance expense related to long-term debt (1,102) (1,014) (4,516) (4,177)
Investment income, net 145 6,367 851 17,251
Gain (costs) related to proposed business
acquisitions not consummated (6) -- (2,238) 2,064
Gain (loss) on sale of businesses -- 5,834 (1,218) 5,834
Other income, net 1,159 1,457 1,358 2,881
--------- --------- --------- ----------
Income (loss) from continuing operations
before income taxes and minority interests 285 (12,543) (16,634) (14,573)
(Provision for) benefit from income taxes (223) 2,356 3,329 1,371
Minority interests in loss of a consolidated subsidiary 1,293 7 3,548 119
--------- ----------- --------- --------
Income (loss) from continuing operations 1,355 (10,180) (9,757) (13,083)
Gain on disposal of discontinued operations 11,100 2,245 11,100 2,245
--------- --------- --------- ----------
Net income (loss) $ 12,455 $ (7,935) $ 1,343 $ (10,838)
========= ========= ========= ==========
Basic income (loss) per share of Class A common
stock and Class B common stock:
Continuing operations $ .02 $ (.17) $ (.16) $ (.22)
Discontinued operations .18 .04 .18 .04
--------- -------- -------- ----------
Net income (loss) $ .20 $ (.13) $ .02 $ (.18)
========= ======== ======== ==========
Diluted income (loss) per share of Class A common
stock and Class B common stock:
Continuing operations $ .02 $ (.17) $ (.16) $ (.22)
Discontinued operations .17 .04 .18 .04
--------- -------- -------- ----------
Net income (loss) $ .19 $ (.13) $ .02 $ (.18)
========= ======== ======== ==========
Shares used to calculate income (loss) per share (c):
Class A common stock
Basic 20,370 19,798 20,446 20,003
========= ========= ========= ==========
Diluted 21,514 19,798 (d) 20,446 (d) 20,003 (d)
========= ========= ========= ==========
Class B common stock
Basic 40,740 39,609 40,892 40,010
========= ========= ========= ==========
Diluted 43,028 39,609 (d) 40,892 (d) 40,010 (d)
========= ========= ========= ==========
(footnotes on following page)
(a) On December 27, 2002, the Company completed the acquisition of Sybra,
Inc. Prior to the acquisition, Sybra was the second largest franchisee of
Arby's(R) restaurants. The consolidated results of operations for the 2003
periods include the results of the company-owned restaurants (236 as of December
28, 2003) acquired in the Sybra acquisition but no longer include royalties and
franchise and related fees from Sybra, which are eliminated in consolidation.
The consolidated results of operations for the 2002 periods, however, include
royalties and franchise and related fees from Sybra but do not include the
results of the acquired restaurants.
(b) Includes royalties and franchise and related fees from Sybra for the
2002 periods whereas the royalties and franchise and related fees from Sybra for
the 2003 periods were eliminated in consolidation. Such royalties were $2.0
million and $1.8 million for the 2002 and 2003 fourth quarters, respectively,
and $7.4 million and $7.1 million for the 2002 and 2003 fiscal years,
respectively.
(c) The calculations of income (loss) per share reflect the effect of the
Company's September 2003 stock distribution of two shares of a newly designated
series 1 of Class B common stock for each issued share of Class A common stock.
(d) The shares used to calculate diluted loss per share are the same as
those used to calculate basic loss per share in periods with losses from
continuing operations and, therefore, the effect of all potentially dilutive
securities would have been antidilutive. Had the Company reported income from
continuing operations for such periods, the shares used to calculate diluted
income per Class A common share would have been 21,586,000 for the 2003 fourth
quarter, and 21,737,000 and 21,524,000 for fiscal 2002 and 2003, respectively,
reflecting the effect of dilutive stock options. The shares used to calculate
diluted income per Class B common share would have been 43,185,000 for the 2003
fourth quarter, and 43,474,000 and 43,051,000 for fiscal 2002 and 2003,
respectively, also reflecting the effect of dilutive stock options. The effects
of dilutive stock options represented in such amounts reflect the average price
of the Company's stock during the indicated periods. These dilutive effects may
not be representative of the effects that may occur in future periods.
Accordingly, this information is presented for informational purposes only. In
addition to the effect of dilutive stock options, the Company's 5% Convertible
Notes are convertible into 4,375,000 shares of the Company's Class A common
stock and 8,750,000 shares of the Company's Class B common stock. Such
additional shares were not included in the diluted shares above due to the
substantial income from continuing operations that would be required before the
Convertible Notes became dilutive.