Exhibit 99.1
Triarc Companies, Inc.
280 Park Avenue
New York, NY 10017
For Immediate Release
CONTACT: Anne A. Tarbell
(212) 451-3030
www.triarc.com
TRIARC REPORTS FIRST QUARTER 2005 RESULTS
o Strong Increase in Arby's(R) Same-Store Sales
New York, NY, May 12, 2005 - Triarc Companies, Inc. (NYSE: TRY; TRY.B)
announced today the results of operations for its first quarter ended April 3,
2005.
Consolidated Highlights
o Consolidated revenues increased to $87.7 million in the 2005 first quarter
from $69.2 million in the 2004 first quarter primarily reflecting $12.9
million in asset management and related fees of Deerfield & Company LLC
("Deerfield"), in which Triarc acquired an approximate 64% capital interest
in July 2004, as well as increases in net sales from company-owned
Arby's(R) restaurants and in royalties and franchise and related fees for
the 2005 quarter. First quarter 2005 Arby's systemwide same-store sales
were up 4% from the 2004 first quarter.
o Consolidated net income was $2.7 million, or $0.04 per diluted Class A and
Class B share, in the 2005 first quarter, compared with a net loss of
$(3.2) million, or $(0.5) per diluted Class A and Class B share, in the
2004 first quarter.
o Consolidated earnings before interest, taxes, depreciation and amortization
("EBITDA") (which we define as operating profit plus depreciation and
amortization, other than amortization of deferred financing costs) was $6.0
million in the 2005 first quarter, compared with $3.3 million in the 2004
first quarter. The attached table provides the calculation of EBITDA and a
reconciliation of EBITDA to our net income or (loss).
o Consolidated operating profit was relatively flat at $0.4 million in the
2005 first quarter compared with approximately breakeven in the 2004 first
quarter. 2005 first quarter consolidated operating profit reflects the
impact of an increase in restaurant operating profit as well as the
operating profit of Deerfield, substantially offset by an increase in
corporate general and administrative expenses reflecting higher employee
compensation costs principally due to higher incentive compensation.
o The 2005 period included a $9.6 million gain principally related to the
January 2005 sale of common stock of Encore Capital Group, Inc. (NASDAQ:
ECPG), a strategic equity investment of the Company. The Company currently
owns 6.3% of Encore's outstanding common stock.
o Consolidated net investment income increased to $9.1 million in the 2005
first quarter from $6.5 million in the 2004 first quarter. The increase was
due primarily to higher interest income principally reflecting an increase
in average rates on our interest-bearing investments and the interest
income of Deerfield and, to a lesser extent, higher recognized net gains on
investments.
o Consolidated depreciation and amortization was $5.5 million in the 2005
first quarter versus $3.4 million in the 2004 first quarter. This increase
reflects the inclusion of the depreciation and amortization related to
Deerfield as well as the effects of the implementation of new back office
and point-of-sale systems at company-owned Arby's restaurants in the second
half of 2004.
o Consolidated interest expense was $10.3 million in the 2005 first quarter
compared with $9.6 million in the 2004 first quarter. The increase
primarily reflects an increase in interest expense on debt securities sold
with an obligation to purchase or under agreements to repurchase within our
short-term trading portfolio, partially offset by the effect of lower
balances of the majority of our long-term debt.
o In the 2004 first quarter, we expensed $0.8 million related to a proposed
business acquisition we did not pursue. In the 2005 first quarter, we
recognized $1.3 million of costs related to our decision not to pursue a
certain financing alternative in connection with a potential acquisition
that is still pending.
Restaurant Operations Highlights
o Net sales from company-owned Arby's restaurants were $51.2 million in the
2005 first quarter, compared with $46.7 million in the 2004 first quarter.
Royalties and franchise and related fees were $23.6 million in the 2005
first quarter, up from $22.5 million in the 2004 first quarter.
o The 2005 first quarter increase in sales from company-owned restaurants
primarily reflects a 9% increase in same-store sales, compared with the
weak same-store sales performance during the 2004 comparable period,
primarily as a result of an increase in print media advertising, primarily
couponing, and other marketing initiatives and new product introductions,
notably Market Fresh(R) salads and wraps, which began in April 2004.
o The 2005 first quarter increase in royalties and franchise and related fees
reflects an increase in same-store sales of franchised restaurants of 3%
compared with the weak same-store sales performance during the 2004
comparable period. Royalties and franchise and related fees were also
positively impacted by royalties from 81 franchised Arby's restaurants
opened since March 28, 2004, with generally higher than average sales
volumes, replacing the royalties from the 74 generally underperforming
franchised restaurants closed since March 28, 2004.
o Systemwide same-store sales were up 4% in the 2005 first quarter versus
flat systemwide same-store sales in the 2004 first quarter. We currently
expect the increase in 2005 systemwide same-store sales to be between 3%
and 4%, reflecting the impact of continued new product introductions,
improved advertising and marketing and better operating efficiencies.
o The gross margin on Arby's company-owned restaurants' sales improved to 23%
in the 2005 first quarter from 20% in the comparable 2004 period. This
improvement principally reflects better oversight and training of store
management and improved operational reporting made available by the new
back office and point-of-sale restaurant systems implemented in the second
half of 2004 that facilitated labor efficiencies and reduced food waste,
slightly lower costs for roast beef and the impact of certain price
increases implemented in the second half of 2004. During the remainder of
2005, we expect that the improvement in the gross margin on Arby's
company-owned restaurants experienced during the 2005 first quarter will
continue.
o Our restaurant business operating profit increased to $14.1 million in the
2005 first quarter versus $12.0 million in the 2004 first quarter,
reflecting the revenue increases and improved operating efficiencies noted
above, partially offset by increases in depreciation and amortization (see
below), advertising and selling expenses, and general and administrative
expenses. The increase in advertising and selling expenses reflects
increased spending for print media campaigns, primarily couponing. The
increase in general and administrative expenses reflects higher
compensation expenses.
o Depreciation and amortization from our restaurant operations was $2.9
million in the 2005 first quarter versus $2.0 million in the 2004 first
quarter. This increase partially reflects the implementation of new back
office and point-of-sale restaurant systems in our company-owned
restaurants in the second half of 2004.
o Restaurant business EBITDA was $17.1 million in the 2005 first quarter
compared with $14.0 million in the 2004 first quarter, reflecting the
factors discussed above. Restaurant EBITDA is reconciled to consolidated
EBITDA, which is in turn reconciled to consolidated net income or (loss),
on the attached table.
o In the 2005 first quarter, the Arby's system opened 11 new units and closed
13 generally underperforming units. As of April 3, 2005, Arby's had
commitments from franchisees to build 441 new units through 2011.
Asset Management Highlights
o Triarc accounts for Deerfield, its asset management business, as a
consolidated subsidiary with a minority interest. For the 2005 first
quarter, Deerfield's reported asset management and related fees, operating
profit, depreciation and amortization and EBITDA, after the effects of
purchase accounting adjustments and before the effect of minority
interests, were $12.9 million, $2.8 million, $1.1 million and $3.9 million,
respectively. Asset management EBITDA is reconciled to consolidated EBITDA,
which is in turn reconciled to consolidated net income or (loss), on the
attached table.
o Excluding the effects of purchase accounting adjustments associated with
our acquisition of Deerfield in July 2004, 2005 first quarter asset
management and related fees, operating profit, depreciation and
amortization and EBITDA, before the effect of minority interests, were
$13.5 million, $4.3 million, $0.1 million and $4.4 million, respectively.
The attached table provides a reconciliation of these measures to the
corresponding measures without exclusion of the effects of purchase
accounting adjustments associated with the Deerfield acquisition.
o As of April 3, 2005, Deerfield had approximately $8.8 billion of assets
under management ("AUM"), of which approximately $115 million was
attributable to investments by Triarc to seed new fixed-income funds
managed by Deerfield. Deerfield's AUM at April 3, 2005 consisted of
approximately $7.3 billion in 18 CDOs and a structured loan fund,
approximately $900 million in seven hedge funds, approximately $370 million
in a real estate investment trust ("REIT") and approximately $200 million
in five managed accounts.
o On April 1, 2005, Deerfield Triarc Capital Corp. ("DTCC") filed a
registration statement with the Securities and Exchange Commission for the
initial public offering of $450 million of its common stock. DTCC is an
externally managed REIT, with Deerfield Capital Management LLC, a wholly
owned subsidiary of Deerfield, as its manager. DTCC began operations in
December 2004, when it completed a private placement of its common stock
with gross proceeds of $400 million, including $15 million invested by
Triarc. DTCC invests in a diversified portfolio of real-estate securities
and various alternative investments, such as syndicated bank loans,
corporate mezzanine loans, and private equity.
Commenting on asset management operations, Nelson Peltz, Triarc's Chairman
and Chief Executive Officer, said: "We are pleased with Deerfield's 2005 first
quarter results. We continue to work closely with Deerfield's senior team as
they develop strategies to grow Deerfield's AUM and expand its asset management
expertise."
Commenting on Arby's 2005 first quarter results, Peter May, Triarc's
President and Chief Operating Officer, said: "Arby's posted a solid quarter and
the outlook for the remainder of the year is positive, due to a strong new
product pipeline and improved advertising and marketing. We are also pleased
with the sales rebound at our company-owned stores and their improved operating
performance."
Commenting on future Triarc corporate opportunities, Peltz concluded: "As
we look ahead, we see a number of opportunities for growth at both Arby's and
Deerfield. Both organizations, led by strong and seasoned management teams, have
great franchises capable of further expansion. We are also continuing to explore
our options with the goal of further increasing stockholder value. We are
excited about 2005 and confident that our management teams can build
substantially more stockholder value at Triarc."
Triarc is a holding company and, through its subsidiaries, the franchisor
of the Arby's restaurant system and the owner and operator of 233 restaurants
located in the United States. Triarc also owns an approximate 64% capital
interest in Deerfield & Company LLC, a Chicago-based asset manager offering a
diverse range of fixed income and credit-related strategies to institutional
investors.
# # #
Notes and Table To Follow
NOTES TO PRESS RELEASE
1. In addition to the results provided in accordance with U.S. Generally
Accepted Accounting Principles ("GAAP") in this press release, we present
EBITDA because we believe it is a useful supplement to operating profit in
understanding and assessing our consolidated results as well as the results
of our segments. We also use EBITDA to evaluate our segment performance and
allocate resources. Because all companies do not calculate EBITDA or
similarly titled financial measures in the same way, those measures may not
be consistent with the way we calculate EBITDA. Our presentation of EBITDA
is not intended to replace the presentation of our financial results in
accordance with GAAP. EBITDA should not be considered as an alternative to
operating profit or net income or loss.
2. In addition to the results provided in accordance with GAAP in this press
release, we present Deerfield's asset management and related fees,
operating profit, depreciation and amortization and EBITDA before the
effect of minority interests, excluding the effects of purchase accounting
adjustments associated with the Deerfield acquisition. We believe these
non-GAAP financial measures enhance management's ability to compare
Deerfield's historical and future operating results and to compare
Deerfield's operating results to those of its competitors. We also believe
these non-GAAP financial measures are useful to investors in allowing for
greater transparency of supplemental information used by management in its
financial and operational decision-making. Our presentation of certain
non-GAAP performance measures of Deerfield is not intended to replace the
presentation of its financial results in accordance with GAAP.
3. 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.
4. We define gross margin as the difference between net sales and cost of
sales divided by net sales.
5. There can be no assurance that we or Deerfield will be able to identify
appropriate future acquisition targets or that we or Deerfield will be able
to successfully integrate any future acquisitions into our or Deerfield's
existing operations.
6. A registration statement relating to Deerfield Triarc Capital Corp.'s
common stock has been filed with the Securities and Exchange Commission but
has not yet become effective. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement
becomes effective. This press release shall not constitute an offer to sell
or the solicitation of an offer to buy these securities nor shall there be
any sale of these securities in any state in which such offer, solicitation
or sale would be unlawful prior to registration or qualification under the
securities laws of any such state.
7. 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," "plans,"
"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:
o competition, including pricing pressures and the potential impact of
competitors' new units on sales by Arby's(R) restaurants;
o consumers' perceptions of the relative quality, variety and value of the
food products the Company offers;
o success of operating initiatives;
o development costs;
o advertising and promotional efforts;
o brand awareness;
o the existence or absence of positive or adverse publicity;
o new product and concept development by the Company and its competitors, and
market acceptance of such new product offerings and concepts;
o 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";
o changes in spending patterns and demographic trends;
o the business and financial viability of key franchisees;
o the timely payment of franchisee obligations due to the Company;
o availability, location and terms of sites for restaurant development by the
Company and its franchisees;
o the ability of the Company's 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 or unanticipated restaurant closures by the Company and its
franchisees;
o the Company's 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, and the willingness of
the Company's franchisees to participate in its strategy;
o business abilities and judgment of the Company's and its franchisees'
management and other personnel;
o availability of qualified restaurant personnel to the Company and to its
franchisees;
o 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;
o changes in commodity (including beef), labor, supplies and other operating
costs and availability and cost of insurance;
o adverse weather conditions;
o significant reductions in the Company's client assets under management
(which would reduce the Company's advisory fee revenue), due to such
factors as weak performance of the Company's investment products (either on
an absolute basis or relative to our competitors or other investment
strategies), substantial illiquidity or price volatility in the fixed
income instruments that the Company trades, loss of key portfolio
management or other personnel, reduced investor demand for the types of
investment products the Company offers, and loss of investor confidence due
to adverse publicity;
o increased competition from other asset managers offering similar types of
products to those the Company offers;
o pricing pressure on the advisory fees that the Company can charge for its
investment advisory services;
o difficulty in increasing assets under management, or efficiently managing
existing assets, due to market-related constraints on trading capacity or
lack of potentially profitable trading opportunities;
o removal of the Company as investment manager of one or more of the
collateral debt obligation vehicles (CDOs) or other accounts it manages, or
the reduction in the Company's CDO management fees because of payment
defaults by issuers of the underlying collateral;
o availability, terms (including changes in interest rates) and deployment of
capital;
o changes in legal or self-regulatory requirements, including franchising
laws, investment management regulations, accounting standards,
environmental laws, overtime rules, minimum wage rates and taxation rates;
o the costs, uncertainties and other effects of legal, environmental and
administrative proceedings;
o the impact of general economic conditions on consumer spending or
securities investing, including a slower consumer economy and the effects
of war or terrorist activities;
o the Company's ability to identify appropriate acquisition targets in the
future and to successfully integrate any future acquisitions into its
existing operations; and
o other risks and uncertainties affecting the Company referred to in its
Annual Report on Form 10-K for the fiscal year ended January 2, 2005 (see
especially "Item 1. Business--Risk Factors" and "Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operations")
and in its 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 the Company's control.
All future written and oral forward-looking statements attributable to us or any
person acting on our behalf are expressly qualified in their entirety by the
cautionary statements contained or referred to above. New risks and
uncertainties arise from time to time, and it is impossible for us to predict
these events or how they may affect us. We assume no obligation to update any
forward-looking statements after the date of this press release as a result of
new information, future events or developments, except as required by federal
securities laws. 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. and Subsidiaries
Condensed Consolidated Statements of Operations
Quarters Ended March 28, 2004 and April 3, 2005
2004 2005
---- ----
(In thousands except per share amounts)
(Unaudited)
Revenues:
Net sales..............................................................$ 46,724 $ 51,190
Royalties and franchise and related fees .............................. 22,467 23,579
Asset management and related fees (a).................................. -- 12,928
--------- ---------
69,191 87,697
--------- ---------
Costs and expenses:
Cost of sales, excluding depreciation and amortization................. 37,385 39,189
Cost of services, excluding depreciation and amortization (a).......... -- 4,149
Advertising and selling................................................ 4,167 4,583
General and administrative, excluding depreciation and amortization.... 24,310 33,814
Depreciation and amortization, excluding amortization of deferred
financing costs...................................................... 3,351 5,526
--------- ---------
69,213 87,261
--------- ---------
Operating profit (loss)............................................ (22) 436
Interest expense......................................................... (9,634) (10,253)
Insurance expense related to long-term debt.............................. (991) (904)
Investment income, net................................................... 6,524 9,100
Gain on sale of business................................................. 16 9,608
Other expense, net....................................................... (40) (370)
--------- ---------
Income (loss) before income taxes and minority interests .......... (4,147) 7,617
Benefit from (provision for) income taxes................................ 991 (2,513)
Minority interests in income of consolidated subsidiaries................ -- (2,425)
--------- ---------
Net income (loss)..................................................$ (3,156) $ 2,679
========= =========
EBITDA (b)...............................................................$ 3,329 $ 5,962
========= =========
Basic and diluted income (loss) per share of Class A common stock and
Class B common stock.................................................$ (.05) $ .04
======== ========
Shares used to calculate income (loss) per share:
Class A common stock
Basic............................................................ 19,992 23,709
--------- ---------
Diluted.......................................................... 19,992 (c) 24,851
--------- ---------
Class B common stock
Basic............................................................ 40,154 41,844
--------- ---------
Diluted.......................................................... 40,154 (c) 44,375
--------- ---------
(a) On July 22, 2004 the Company completed the acquisition of a 63.6% capital
interest in Deerfield. Deerfield, through its wholly-owned subsidiary
Deerfield Capital Management LLC, is an asset manager offering a diverse
range of fixed income and credit-related strategies to institutional
investors.
(b) The calculation of EBITDA by segment and a reconciliation of consolidated
EBITDA to net income or loss follow:
2004 2005
---- ----
(In thousands except per share amounts)
(Unaudited)
Operating profit (loss):
Restaurants..........................................................$ 11,996 $ 14,127
Asset management .................................................... -- 2,840
General corporate.................................................... (12,018) (16,531)
--------- ---------
Consolidated operating profit (loss)............................... (22) 436
--------- ---------
Plus: depreciation and amortization, excluding
amortization of deferred financing costs:
Restaurants.......................................................... 2,015 2,936
Asset management..................................................... -- 1,083
General corporate.................................................... 1,336 1,507
--------- ---------
Consolidated depreciation and amortization......................... 3,351 5,526
--------- ---------
EBITDA:
Restaurants.......................................................... 14,011 17,063
Asset management..................................................... -- 3,923
General corporate.................................................... (10,682) (15,024)
--------- ---------
Consolidated EBITDA................................................ 3,329 5,962
Depreciation and amortization, excluding
amortization of deferred financing costs............................... (3,351) (5,526)
Interest expense......................................................... (9,634) (10,253)
Insurance expense related to long-term debt.............................. (991) (904)
Investment income, net................................................... 6,524 9,100
Gain on sale of business................................................. 16 9,608
Other expense, net....................................................... (40) (370)
--------- ---------
Consolidated income (loss) before income taxes and minority interests (4,147) 7,617
Benefit from (provision for) income taxes................................ 991 (2,513)
Minority interests in income of consolidated subsidiaries................ -- (2,425)
--------- ---------
Net income (loss)....................................................$ (3,156) $ 2,679
========= =========
(c) The shares used to calculate diluted loss per share are the same as those
used to calculate basic loss per share for the 2004 first quarter since
there was a net loss and, therefore, the effect of all potentially dilutive
securities on the loss per share would have been antidilutive. Had the
Company reported net income for the 2004 first quarter, the shares used to
calculate diluted income per Class A common share would have been
21,780,000, reflecting the effect of dilutive stock options. The shares
used to calculate diluted income per Class B common share would have been
43,729,000, 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 that period. 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 currently 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 that would be
required before the Convertible Notes became dilutive.
(d) The reconciliation of certain operating measures of Deerfield before
purchase accounting adjustments to such measures after purchase accounting
adjustments for the 2005 first quarter follows:
Depreciation and
Amortization,
Excluding
Asset Amortization
Management of Deferred
and Related Operating Financing
Fees(1) Profit(1) Costs(1) EBITDA(1)
---------- -------- ------------- --------
(In thousands)
Before purchase accounting adjustments (2) ........ $13,505 $ 4,270 $ 84 $ 4,354
Expected asset management fees recorded as a
receivable in purchase accounting............ (577) (577) -- (577)
Cost of services recorded as a liability
in purchase accounting (3)................... -- 146 -- 146
Amortization of intangible assets recorded in
purchase accounting.......................... -- (999) 999 --
-------- --------- ------- --------
After purchase accounting adjustments..............$ 12,928 $ 2,840 $ 1,083 $ 3,923
======== ========= ======= ========
- ---------------
(1) All amounts are before the effects of minority interests.
(2) The asset management and related fees, operating profit and EBITDA before
purchase accounting adjustments reflect the elimination of asset management
fees paid to Deerfield by Triarc of $0.4 million.
(3) Represents incentive compensation relating to the receivable recorded in
purchase accounting.