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WEN » Topics » TRIARC COMPANIES, INC. AND SUBSIDIARIES NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET

This excerpt taken from the WEN 8-K filed Aug 26, 2005.

TRIARC COMPANIES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED BALANCE SHEET

Reclassifications, Eliminations and Excluded Items Adjustments
(a)   To eliminate assets and liabilities which, on a pro forma basis, would be intercompany items between the Company and RTM.
(b)   To eliminate assets not acquired and liabilities not assumed in the RTM Acquisition but included in the RTM combined balance sheet as of May 29, 2005 with the difference included in (1) “Retained earnings” until all of the $46,644,000 of RTM retained earnings had been eliminated, (2) “Additional paid-in capital” until all of the $27,070,000 of RTM additional paid-in capital had been eliminated, including the amount reclassified in entry (d) below, and (3) accumulated deficit of RTM for the excess of $9,580,000.
(c)   To reclassify RTM's computer software from “Properties” to “Asset management contracts and other intangible assets” to conform with the Company's classification.
Pro Forma Adjustments for the RTM Acquisition
(d)   To reclassify RTM's deferred stock compensation for nonvested variable stock options and stock appreciation rights from “Other liabilities and deferred income” to “Additional paid-in capital” to reflect the vesting of such deferred stock compensation immediately prior to the RTM Acquisition.
(e)   To reflect the Company's estimated investment in RTM of $369,209,000 consisting of (1) $175,000,000 in cash, including approximately $17,024,000 for the settlement loss from unfavorable franchise rights, subject to post-closing adjustment, (2) 9,684,000 shares of the Company's class B common stock, series 1 (the “Class B Common Stock”) issued from treasury with a fair value of $145,265,000 as of July 25, 2005 based on the closing price of the Company's Class B Common Stock on such date of $15.00 per share, (3) $21,817,000 of debt, including related accrued interest and prepayment penalties, that was not an obligation of the entities included in the RTM Acquisition, (4) the vested portion of stock options to purchase 774,000 shares of the Company's Class B Common Stock, with a fair value of $4,127,000 as of July 25, 2005, issued in exchange for existing RTM stock options and (5) $23,000,000 of related estimated expenses, of which (a) $4,379,000 was paid as of July 3, 2005 including $3,915,000 included in “Prepaid expenses and other currents assets” and $464,000 in “Deferred costs and other assets” and (b) $6,524,000 had been accrued in “Accounts payable” as of July 3, 2005 with an offsetting amount in “Deferred costs and other assets”. The settlement loss from unfavorable franchise rights resulted from royalty rates less than the current standard 4% rate in franchise agreements acquired in the RTM Acquisition. The average cost of the 9,684,000 shares issued from treasury aggregated $81,542,000. The value of the vested portion of the options to purchase 774,000 shares was determined by subtracting the intrinsic value of the nonvested portion of the options related to future service of the employees from the fair value of the total options calculated using the Black-Scholes-Merton option pricing model. The closing price on July 25, 2005 of the Company's Class B Common Stock was used to value the 9,684,000 shares in (2) above since that was the date that the final terms of the RTM Acquisition were agreed to and announced.
(f)   To reflect the collection of notes receivable from RTM shareholders in connection with the RTM Acquisition.
(g)   To reflect the nonvested portion of the stock options to purchase 774,000 shares, described in more detail in entry (e) above, in unearned compensation.

54

TRIARC COMPANIES, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED BALANCE SHEET—(Continued)

(h)   To record the allocation of the purchase price of RTM, on a preliminary basis subject to change, and the settlement loss from unfavorable franchise rights, as follows (in thousands):
      Debit
(Credit)
          
 
          

Adjust “Properties” to increase the carrying amount to fair value in accordance with a preliminary independent appraisal

      $ 15,821  
          

Adjust “Asset management contracts and other intangible assets” to increase the carrying amount of favorable leases by $37,418 and franchise agreements by $4,137 to fair value in accordance with a preliminary independent appraisal

        41,555  
          

Eliminate lease acquisition costs included in “Deferred costs and other assets”

        (877 )
          

Adjust RTM's unfavorable leases included in “Other liabilities and deferred income” to fair value in accordance with a preliminary independent appraisal

        (8,364 )
          

Eliminate RTM's deferred income and accruals for rent differentials recognized on a straight-line basis included in “Other liabilities and deferred income”

        19,117  
          

Adjust RTM's sale-leaseback obligations that do not qualify for sale-leaseback accounting and capitalized lease obligations included in “Long-term debt” to fair value in accordance with a preliminary independent appraisal

        (8,972 )
          

Record “Deferred income taxes” for the tax effects of the purchase price allocation adjustments above, excluding $6,459 which will be deductible for income tax purposes, at the incremental tax rate of 40%

        (20,728 )
          

Record the settlement loss from unfavorable franchise rights which are agreements that provide for royalty rates less than the current standard 4% rate

        17,024  
          

Eliminate the $2 par value of the RTM common stock from “RTM Restaurant Group common stock,” the RTM accumulated deficit of $9,580 from “Retained earnings” after the effects on retained earnings of the elimination of excluded assets and liabilities included in entry (b) above and the $20,720 of RTM “Common stock held in treasury”

        (30,298 )
           Eliminate the Company's investment in RTM        (369,209 )
          

Adjust “Goodwill” to eliminate the historical goodwill of RTM of $63,777 and record the excess of the Company's investment in RTM over the adjusted net liabilities of RTM

        344,931  
          
 
         $ —  
          
 
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