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 FULL YEAR AND FOURTH QUARTER 2005 RESULTS
o Arby's(R) revenues boosted by July 2005 acquisition of RTM
o Deerfield's assets under management continue to grow
New York, NY, April 3, 2006 - Triarc Companies, Inc. (NYSE: TRY; TRY.B)
announced today the results of operations for its fiscal year and fourth quarter
ended January 1, 2006.
Consolidated Highlights
-----------------------
o Consolidated revenues increased to $727.3 million in the 2005 fiscal
year ($305.6 million in the 2005 fourth quarter) from $328.6 million
in the 2004 fiscal year ($96.0 million in the 2004 fourth quarter)
primarily reflecting the July 2005 acquisition of RTM Restaurant Group
("RTM"), the owner of 775 Arby's(R) restaurants as of the date of the
acquisition. RTM's net sales since the acquisition were $357.5
million.
o Consolidated revenues were also positively impacted by increases in
the asset management and related fees of Deerfield & Company LLC
("Deerfield") in which Triarc acquired a controlling interest in July
2004. Deerfield's revenues increased to $65.3 million in the 2005
fiscal year ($27.4 million in the 2005 fourth quarter) from $22.1
million in the 2004 fiscal year ($15.1 million in the 2004 fourth
quarter). These increases reflect both the full-period effect of
Deerfield and asset management fees from new and existing investment
vehicles in the 2005 periods.
o Partially offsetting the above increases was the elimination in
consolidation of $13.6 million of royalties and franchise fees paid by
RTM to Arby's, LLC in the 2005 fiscal year as a result of the
acquisition of RTM.
o Consolidated net income (loss) was a loss of $(55.6) million, or
$(0.79) per diluted Class A and Class B, Series 1 share, in the 2005
fiscal year (net loss of $(16.2) million, or $(0.21) per diluted Class
A and Class B, Series 1 share, in the 2005 fourth quarter), compared
with net income of $13.9 million, or $0.19 per diluted Class A and
$0.22 per diluted Class B, Series 1 share in the 2004 fiscal year (net
loss of $(3.6) million, or $(0.06) per diluted Class A and Class B,
Series 1 share in the 2004 fourth quarter). These changes principally
reflect: (1) the after-tax effect of losses on the early
extinguishment of debt and settlement of unfavorable franchise rights
(i.e., the settlement of those franchise agreements with RTM that
provided for a less than 4% royalty rate, as further described below),
both related to the July 2005 acquisition of RTM, (2) the after-tax
effect of facilities relocation and restructuring charges related to
the integration of RTM with Arby's and the relocation of Arby's
corporate headquarters from Fort Lauderdale, FL to Atlanta, GA, (3) a
decrease in gains from discontinued operations in the 2005 period and
(4) the after-tax effect in the 2005 period of provisions for
stock-based compensation, as further described below. The 2004 fiscal
year reflected credits related to the release of tax reserves and a
reversal of interest accruals through interest expense recognized in
the 2004 third 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 $4.6 million in the 2005 fiscal year (loss of
$(8.5) million in the 2005 fourth quarter), compared with $22.8
million in the 2004 fiscal year ($2.5 million in the 2004 fourth
quarter). The attached table provides the calculation of EBITDA and a
reconciliation of EBITDA to our consolidated net income (loss).
o Consolidated operating profit (loss) was a loss of $(32.1) million in
the 2005 fiscal year (loss of $(24.1) million in the 2005 fourth
quarter) compared with a profit of $2.7 million in the 2004 fiscal
year (loss of $(6.1) million in the 2004 fourth quarter), reflecting
the loss on settlement of unfavorable franchise rights, severance,
retention and other expenses relating to the RTM acquisition and the
cost of the relocation of Arby's corporate headquarters to Atlanta in
the 2005 periods, as well as higher general and administrative
expenses, principally reflecting higher incentive compensation,
increased headcount and provisions in the 2005 periods for stock-based
compensation (see below), which more than offset the impact of the RTM
acquisition and an increase in the operating profit of Deerfield.
o Provisions for stock-based compensation increased to $29.6 million in
fiscal 2005 ($24.1 million in the 2005 fourth quarter) from $0.5
million in fiscal 2004 ($0.1 million in the 2004 fourth quarter). This
increase reflects: (1) a provision for the intrinsic value of the
stock options exercised in December 2005 by certain of our executive
officers that were replaced by us on the date of exercise for our own
tax planning reasons, (2) charges for the recognition of a portion of
the value of grants of restricted stock we made in March 2005 and (3)
amortization related to the grant in November 2005 of equity interests
in two of our subsidiaries, granted to certain members of our
management.
o Consolidated depreciation and amortization was $36.7 million in the
2005 fiscal year ($15.6 million in the 2005 fourth quarter) versus
$20.1 million in the 2004 fiscal year ($8.5 million in the 2004 fourth
quarter). These increases principally reflect the additional
depreciation and amortization related to the RTM acquisition.
o A loss on the settlement of unfavorable franchise rights of $17.1
million was recognized in the third quarter of the 2005 fiscal year
(loss of $0.1 million in the 2005 fourth quarter). This charge was
recognized in accordance with certain generally accepted accounting
principles that require that any preexisting business relationship
between the parties to a business combination be evaluated and
accounted for separately. Under this accounting guidance, the
franchise agreements held by RTM with royalty rates below the current
4% royalty rate that Arby's receives on new franchise agreements were
required to be valued and recognized as an expense in the 2005 third
quarter and excluded from the purchase price paid for RTM.
o Consolidated interest expense was $68.8 million in the 2005 fiscal
year ($24.0 million in the 2005 fourth quarter), compared with $34.2
million in the 2004 fiscal year ($10.5 million in the 2004 fourth
quarter). These increases principally reflect activity of the
Deerfield Opportunities Fund (the "Opportunities Fund"), a
multi-strategy hedge fund managed by Deerfield in which the Company
has an investment and which employs leverage in its investment
strategies, higher average debt balances of the restaurant business
following a refinancing in connection with the RTM acquisition and,
for the year-over-year comparison, the release in the 2004 third
quarter of $4.3 million of interest accruals no longer required upon
the finalization of certain Internal Revenue Service examinations.
o Loss on the early extinguishment of debt totaled $35.8 million in the
2005 periods due to the July 2005 debt refinancing in connection with
the RTM acquisition. The loss reflected prepayment penalties of $27.4
million, the write-off of $4.8 million in deferred financing costs and
$3.6 million of accelerated insurance payments related to the
extinguished debt.
o The 2005 fiscal year included a $13.1 million gain on sales of
unconsolidated businesses ($0.1 million in the 2005 fourth quarter),
which primarily related to sales of common stock of Encore Capital
Group, Inc. (NASDAQ: ECPG), an equity investment of the Company. The
Company owned approximately 5.3% of Encore's outstanding shares as of
January 1, 2006.
o Consolidated net investment income increased to $55.3 million in the
2005 fiscal year ($25.1 million in the 2005 fourth quarter) compared
with $21.7 million in the 2004 fiscal year (income of $14.2 million in
the 2004 fourth quarter). These increases primarily reflect (1)
increases in interest income principally due to the activity of the
Opportunities Fund and, to a lesser extent, an increase in average
rates on interest-bearing investments, (2) charges in the 2004 periods
for other than temporary unrealized losses that did not recur to the
same extent in the 2005 periods and (3) recognized net gains in the
2005 periods.
Restaurant Operations Highlights
--------------------------------
o On July 25, 2005, Triarc completed the acquisition of RTM, Arby's
largest franchisee, which then owned and operated 775 Arby's
restaurants in 22 states. The financial results of Triarc's restaurant
operations following the acquisition reflect the inclusion of RTM. As
a result of the RTM acquisition, among other things, our restaurant
operations' net sales have increased while our royalties and franchise
and related fees have decreased due to the elimination in
consolidation of royalties and franchise and related fees from RTM.
o Net sales from the company-owned Arby's restaurants were $570.8
million in the 2005 fiscal year ($258.5 million in the 2005 fourth
quarter), compared with $205.6 million in the 2004 fiscal year ($53.9
million in the 2004 fourth quarter). Royalties and franchise and
related fees were $91.2 million in the 2005 fiscal year ($19.6 million
in the 2005 fourth quarter), compared with $100.9 million in the 2004
fiscal year ($26.9 million in the 2004 fourth quarter).
o The 2005 fiscal year increase in sales from company-owned restaurants
of $365.2 million ($204.6 million for the 2005 fourth quarter)
principally reflects the $357.5 million effect of the acquisition of
RTM. Excluding the RTM stores, same-store sales increased 5% in the
2005 fiscal year (8% increase in the 2005 fourth quarter) compared
with the 1% increase in the 2004 fiscal year (1% decrease in the 2004
fourth quarter). The increases in same-store sales for existing
company-owned restaurants primarily reflect new product introductions
including new Market Fresh(R) wraps and sandwiches, improved
marketing, including increased print media advertising and focus on
combination meals and value menu programs and operational initiatives
targeting continued improvement in customer service levels and
convenience. These factors were partially offset by the unfavorable
performance of company-owned stores in Michigan, where unemployment
remains high, as well as the negative impact on sales of lower
discretionary consumer spending due to higher fuel costs in the 2005
fiscal year.
o Excluding the RTM stores, 2005 fiscal year same-store sales for
franchised restaurants increased 2% (increase of 5% for the 2005
fourth quarter). The increase in same-store sales of the franchised
restaurants for the 2005 periods reflects the positive impact of new
product introductions, marketing programs and operational initiatives
discussed above, partially offset by the negative impact on sales of
lower discretionary consumer spending due to higher fuel costs in the
2005 fiscal year.
o Royalties and franchise and related fees decreased to $91.2 million in
the 2005 fiscal year ($19.6 million in the 2005 fourth quarter)
compared with $100.9 million in the 2004 fiscal year ($26.9 million in
the 2004 fourth quarter) due to the elimination in consolidation of
royalties and franchise and related fees from RTM after the July 2005
acquisition. Aside from the effect of the RTM acquisition and an
estimated $1.3 million effect of the inclusion of the 53rd week in
2004 which did not recur in 2005, royalties and franchise and related
fees for the year increased $4.6 million, principally reflecting (1) a
$2.3 million increase in royalties from the 76 restaurants opened in
2005, with generally higher than average sales volumes, replacing the
royalties from the 46 generally underperforming restaurants that
closed in 2005 and (2) a $1.4 million increase in royalties due to a
2% increase in same-store sales of the franchised restaurants,
excluding the RTM Stores, in 2005 as compared with 2004.
o Systemwide same-store sales were up 2% in the 2005 fiscal year (up 5%
in the 2005 fourth quarter) versus an increase of 4% in the 2004
fiscal year (up 3% in the 2004 fourth quarter), reflecting the factors
discussed above. We currently expect systemwide same-store sales to be
positive for the 2006 fiscal year reflecting continued new products
introductions, including the impact of Arby's Chicken Naturals(TM), a
full menu line made with 100% all-natural chicken, which will be
served in all of the restaurants' chicken based sandwiches, wraps,
salads and tenders that was launched in March 2006 as well as
continued improvements in marketing, advertising and promotional
programs and operational initiatives targeting better customer service
levels and convenience.
o The gross margin for our company-owned restaurants increased to 27% of
sales in the 2005 fiscal year (and 2005 fourth quarter) from 21% in
the 2004 fiscal year (and 2004 fourth quarter). These increases
principally reflect the inclusion of the RTM restaurants, which had a
gross margin of 29% for the post-acquisition period of 2005. Aside
from the effect of the RTM acquisition, the gross margin for existing
company-owned restaurants increased to 24% for the 2005 fiscal year
(23% for the 2005 fourth quarter) from 21% for the 2004 fiscal year
(and 2004 fourth quarter) reflecting improved product mix, better
oversight and training of store management, improved operational
reporting made available by the new back office and point-of-sale
restaurant systems implemented in the latter part of 2004 that
facilitated labor efficiencies and reduced food waste and the impact
of certain price increases for some of our Arby's products. We expect
the gross margin for our company-owned restaurants to improve for 2006
reflecting both the inclusion of RTM and the improving operational
efficiencies, discussed above.
o Our restaurant business operating profit decreased to $52.9 million in
the 2005 fiscal year ($13.6 million in the 2005 fourth quarter) versus
$59.2 million in the 2004 fiscal year ($14.1 million in the 2004
fourth quarter) reflecting the impact of the severance, retention and
other expenses relating to the RTM acquisition and the cost of the
relocation of the Arby's corporate headquarters to Atlanta and, for
the year-over-year comparison, the loss on settlement of unfavorable
franchise rights, partially offset by the RTM operating profit and the
improved gross margins noted above.
o Depreciation and amortization for our restaurant operations was $26.4
million in the 2005 fiscal year ($13.3 million in the 2005 fourth
quarter) versus $12.9 million in the 2004 fiscal year ($5.9 million in
the 2004 fourth quarter). These increases reflect the additional
depreciation and amortization related to the restaurants acquired in
the RTM acquisition.
o Restaurant business EBITDA was $79.3 million in the 2005 fiscal year
($26.9 million in the 2005 fourth quarter), compared with $72.1
million in the 2004 fiscal year ($20.0 million in the 2004 fourth
quarter). Restaurant EBITDA is reconciled to consolidated EBITDA
which, in turn, is reconciled to consolidated net income (loss), in
the attached table.
o In the 2005 fiscal year, the Arby's system opened 101 new units (39 in
the 2005 fourth quarter) and closed 56 generally underperforming units
(21 in the 2005 fourth quarter). As of January 1, 2006, Arby's had
commitments from franchisees to build 236 new units through 2011,
which excludes prior commitments from RTM to build 149 new units.
Asset Management Highlights
---------------------------
o Triarc accounts for Deerfield, its asset management business, as a
consolidated subsidiary with a minority interest. For the 2005 fiscal
year, Deerfield's reported asset management and related fees,
operating profit, depreciation and amortization and EBITDA, after the
effects of purchase accounting adjustments associated with the
Deerfield acquisition in July 2004 and before the effect of minority
interests, were $65.3 million, $6.6 million, $4.8 million and $11.5
million, respectively. For the 2004 fiscal year, those amounts were
$22.1 million, $1.6 million, $2.0 million and $3.6 million,
respectively. For the 2005 fourth quarter, those amounts were $27.4
million, $2.2 million, $1.1 million and $3.3 million, respectively,
compared to $15.2 million, $1.5 million, $1.2 million and $2.7
million, respectively, in the 2004 fourth quarter. Deerfield's EBITDA
is reconciled to consolidated EBITDA which, in turn, is reconciled to
consolidated net income (loss), in the attached table.
o Excluding the effects of purchase accounting associated with the
Deerfield acquisition in July 2004 and compensation expense related to
equity interests granted in our asset management segment holding
company, for the 2005 fiscal year, Deerfield's asset management and
related fees, operating profit, depreciation and amortization and
EBITDA, before the effect of minority interests, were $66.4 million,
$17.0 million, $0.4 million and $17.4 million, respectively. For the
2004 fiscal year, those amounts were $26.3 million, $6.1 million, $0.2
million and $6.2 million, respectively. For the 2005 fourth quarter,
those amounts were $27.9 million, $8.5 million, $0.1 million and $8.6
million, respectively, compared to $18.9 million, $4.8 million, $0.1
million and $4.9 million, respectively, in the 2004 fourth quarter.
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 and
the November 2005 grant of equity interests in Deerfield.
o As of January 1, 2006, Deerfield had approximately $12.3 billion of
assets under management ("AUM"), of which approximately $120.0 million
was attributable to investments by Triarc. Deerfield's AUM at January
1, 2006 consisted of approximately $10.4 billion in 23 CDOs and a
structured loan fund, approximately $947.2 million in five hedge
funds, approximately $762.4 million in a real estate investment trust
and approximately $226.0 million in several managed accounts.
o On June 29, 2005, Deerfield Triarc Capital Corp. ("Deerfield Triarc")
completed the initial public offering of approximately 25 million
shares of its common stock and began trading on the New York Stock
Exchange under the ticker symbol "DFR." Formed in December 2004,
Deerfield Triarc is a real estate investment trust managed by
Deerfield that invests in real estate-related securities and various
other asset classes, which currently has approximately $762.4 million
in assets under management. Triarc and its subsidiaries beneficially
own approximately 2.7% of Deerfield Triarc's common stock.
Commenting on asset management operations, Nelson Peltz, Triarc's
Chairman and Chief Executive Officer, said: "Deerfield is an outstanding asset
management franchise marked by leading positions in key markets as well as
strong performance. We anticipate continued growth in assets under management in
2006."
Commenting on Arby's 2005 results, Peter May, Triarc's President and
Chief Operating Officer, said: "There's no question that 2005 was a defining
year for Arby's. By joining our restaurant operations with RTM, we have created
a large, fully integrated and growing restaurant company. We now have a strong
platform in place and see opportunities to improve and accelerate unit
development in a number of markets where historically Arby's has been
underpenetrated. There are also opportunities to improve operating efficiencies
and enhance system-wide profitability. We believe that the Arby's brand is well
positioned for continued growth and look forward to building on the brand's
momentum in 2006."
Commenting on Triarc's possible corporate restructuring, Peltz said:
"As we look ahead, we see a number of opportunities for Arby's and Deerfield.
Nevertheless, Arby's and Deerfield have inherently different growth
characteristics and investment attributes, and given our present corporate
structure, we believe that their full value and growth prospects may not be
fully recognized. In keeping with our goal of enhancing stockholder value, and
in order to unlock the potential value of both of our independently managed
businesses, we are continuing to explore a possible corporate restructuring that
may involve the spin-off to Triarc's stockholders or other disposition of
Triarc's interest in Deerfield."
Peltz added: "Earlier this year, in connection with the possible
corporate restructuring, in addition to our regular quarterly dividends, our
Board announced its intention to declare and pay during 2006 special cash
dividends aggregating $0.45 per share on each outstanding share of our Class A
and Class B Common Stocks, the first installment of which, in the amount of
$0.15 per share, was paid on March 1, 2006. In addition, we completed the
effective conversion of substantially all of our 5% Convertible Notes due 2023.
This had the effect of reducing parent company debt to approximately $25 million
at the end of February 2006 as well as reducing potential future dilution for
our stockholders."
Triarc is a holding company and, through its subsidiaries, the
franchisor of the Arby's(R) restaurant system, which is comprised of
approximately 3,500 restaurants. Of these restaurants, more than 1,000 are owned
and operated by subsidiaries of Triarc. Triarc also owns an approximate 64%
capital interest, a profits interest of at least 52% and approximately 94% of
the voting interests, in Deerfield & Company LLC, a Chicago-based alternative
asset manager offering a diverse range of fixed income and credit-related
strategies to institutional investors with approximately $12.3 billion under
management as of January 1, 2006.
# # #
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 (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 and the grant of equity interests in our asset management
segment holding company. 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
on a stand-alone basis 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. References in this press release to "company-owned" restaurants
include owned and leased restaurants as well as two restaurants
managed pursuant to management agreements.
5. We define gross margin as the difference between net sales and cost of
sales divided by net sales.
6. The description of the RTM acquisition contained herein is only a
summary and is qualified in its entirety by reference to the
definitive agreements relating to the acquisition, copies of which
have been filed by us with the Securities and Exchange Commission as
exhibits to our current and/or periodic filings under the Securities
Exchange Act of 1934, as amended.
7. There can be no assurance RTM will be successfully integrated into our
existing operations.
8. There can be no assurance that we will be able to identify appropriate
future acquisition targets or that we will be able to successfully
integrate any future acquisitions into our existing operations.
9. There can be no assurance that the corporate restructuring will occur
or the form, terms or timing of such restructuring if it does occur.
As of the date hereof, the Board of Directors has not reached any
definitive conclusion concerning the scope, benefits or timing of the
corporate restructuring.
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, affordability
and value of the food products we offer;
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 us and our 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 adverse economic conditions, including high unemployment rates in
geographic regions that contain a high concentration of Arby's
restaurants;
o the business and financial viability of key franchisees;
o the timely payment of franchisee obligations due to us;
o availability, location and terms of sites for restaurant development
by us and our franchisees;
o the ability of our 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 the timing and impact of acquisitions and dispositions of restaurants;
o our ability to successfully integrate acquired restaurant operations;
o anticipated or unanticipated restaurant closures by us and our
franchisees;
o our 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
our franchisees to participate in our strategy;
o business abilities and judgment of our and our franchisees' management
and other personnel;
o availability of qualified restaurant personnel to us and to our
franchisees;
o our 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 our client assets under management (which
would reduce our advisory fee revenue), due to such factors as weak
performance of our 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 we trade, loss of key portfolio management or other
personnel, reduced investor demand for the types of investment
products we offer, and loss of investor confidence due to adverse
publicity;
o increased competition from other asset managers offering similar types
of products to those we offer;
o pricing pressure on the advisory fees that we can charge for our
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 our removal as investment manager of one or more of the collateral
debt obligation vehicles (CDOs) or other accounts we manage, or the
reduction in our CDO management fees because of payment defaults by
issuers of the underlying collateral or the triggering of certain
structural protections built into CDOs;
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; and
o other risks and uncertainties affecting us and our subsidiaries
referred to in referred to in our Annual Report on Form 10-K for the
fiscal year ended January 2, 2005 (see especially "Item 1. 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.
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 in this section. 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
Fourth Quarter and Fiscal Year Ended January 2, 2005 and January 1, 2006 (a) (b)
Fourth Quarter Ended Fiscal Year Ended
-------------------- -----------------
2004 2005 2004 2005
---- ---- ---- ----
(In thousands except per share amounts)
Revenues:
Net sales............................................$ 53,881 $ 258,528 $ 205,590 $ 570,846
Royalties and franchise and related fees............. 26,936 19,617 100,928 91,163
Asset management and related fees ................... 15,146 27,413 22,061 65,325
--------- --------- --------- ---------
95,963 305,558 328,579 727,334
--------- --------- --------- ---------
Costs and expenses:
Cost of sales, excluding depreciation and
amortization....................................... 42,706 189,586 162,597 417,975
Cost of services, excluding depreciation and
amortization ...................................... 5,752 11,443 7,794 24,816
Advertising and selling.............................. 3,820 19,312 16,587 43,472
General and administrative, excluding
depreciation and amortization...................... 41,232 86,641 118,806 205,797
Depreciation and amortization, excluding
amortization of deferred financing costs........... 8,521 15,560 20,061 36,670
Loss on settlements of unfavorable franchise rights.. -- 146 -- 17,170
Facilities relocation and corporate restructuring.... -- 6,949 -- 13,508
--------- --------- --------- ---------
102,031 329,637 325,845 759,408
--------- --------- --------- ---------
Operating profit (loss).......................... (6,068) (24,079) 2,734 (32,074)
Interest expense....................................... (10,516) (23,971) (34,171) (68,789)
Insurance expense related to long-term debt............ (991) -- (3,874) (2,294)
Loss on early extinguishment of debt................... -- (19) -- (35,809)
Investment income, net................................. 14,223 25,060 21,662 55,336
Gain on sale of unconsolidated businesses.............. 97 79 154 13,068
Costs related to proposed business
acquisitions not consummated......................... -- (1,376) (793) (1,376)
Other income (expense), net............................ (645) 3,117 1,199 5,255
--------- --------- --------- ---------
Loss from continuing operations before
income taxes and minority interests ........... (3,900) (21,189) (13,089) (66,683)
Benefit from income taxes.............................. 924 4,886 17,483 16,533
Minority interests in income of consolidated
subsidiaries......................................... (2,264) (2,756) (2,917) (8,762)
--------- --------- --------- ---------
Income (loss) from continuing operations......... (5,240) (19,059) 1,477 (58,912)
Gain on disposal of discontinued operations............ 1,641 2,814 12,464 3,285
--------- --------- --------- ---------
Net income (loss)................................$ (3,599) $ (16,245) $ 13,941 $ (55,627)
========= ========= ========= =========
EBITDA (c).............................................$ 2,453 $ (8,519) $ 22,795 $ 4,596
========= ========= ========= =========
Basic income (loss) per share: Class A common stock:
Continuing operations............................$ (.08) $ (.25) $ .02 $ (.84)
Discontinued operations.......................... .02 .04 .18 .05
--------- ---------- --------- ---------
Net income (loss)................................$ (.06) $ (.21) $ .20 $ (.79)
========= ========== ========= =========
Class B common stock:
Continuing operations............................$ (.08) $ (.25) $ .02 $ (.84)
Discontinued operations.......................... .02 .04 .21 .05
--------- ---------- --------- ---------
Net income (loss)................................$ (.06) $ (.21) $ .23 $ (.79)
========= ========== ========= =========
Diluted income (loss) per share: Class A common stock:
Continuing operations............................$ (.08) $ (.25) $ .02 $ (.84)
Discontinued operations.......................... .02 .04 .17 .05
--------- ---------- --------- ---------
Net income (loss)................................$ (.06) (d) $ (.21) (d) $ .19 $ (.79) (d)
========= ========== ========= =========
Class B common stock:
Continuing operations............................$ (.08) $ (.25) $ .02 $ (.84)
Discontinued operations.......................... .02 .04 .20 .05
--------- ---------- --------- ---------
Net income (loss)................................$ (.06) (d) $ (.21) (d) $ .22 $ (.79) (d)
========= ========== ========= =========
(continued on following page)
Fourth Quarter Ended Fiscal Year Ended
-------------------- -----------------
2004 2005 2004 2005
---- ---- ---- ----
(In thousands)
Shares used to calculate income (loss) per share:
Class A common stock
Basic.............................................. 23,390 23,822 22,233 23,766
========= ========= ========= =========
Diluted............................................ 23,390 (d) 23,822 (d) 23,415 23,766 (d)
========= ========= ========= =========
Class B common stock
Basic.............................................. 41,432 51,772 40,840 46,245
========= ========= ========= =========
Diluted............................................ 41,432 (d) 51,772 (d) 43,206 46,245 (d)
========= ========= ========= =========
- -------------------------------------------------------------------------------------------------------------------
<FN>
(a) On July 25, 2005, the Company completed the acquisition of RTM Restaurant
Group. As of July 25, 2005, RTM owned and operated 775 Arby's restaurants
in 22 states and, prior to the RTM Acquisition, was the largest franchisee
of Arby's restaurants. Following the RTM Acquisition, the consolidated
results of operations for the 2005 fourth quarter and fiscal year include
RTM's results but do not include royalties and franchise and related fees
paid by RTM to Arby's LLC, which are eliminated in consolidation. The
consolidated results of operations for the 2004 fourth quarter and fiscal
year and the pre-acquisition portion of the 2005 periods, however, include
royalties and franchise and related fees from RTM but do not include RTM's
results.
(b) 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. The 2004 periods include the results of Deerfield from the date
of acquisition.
(c) The calculation of EBITDA by segment and a reconciliation of consolidated
EBIDTA to net income or loss follow:
</FN>
Fourth Quarter Ended Fiscal Year Ended
-------------------- -----------------
2004 2005 2004 2005
---- ---- ---- ----
(In thousands)
Operating profit (loss):
Restaurants................................................$ 14,123 $ 13,637 $ 59,182 $ 52,876
Asset management .......................................... 1,483 2,199 1,611 6,637
General corporate.......................................... (21,674) (39,915) (58,059) (91,587)
--------- --------- ---------- --------
Consolidated operating profit (loss)...................... (6,068) (24,079) 2,734 (32,074)
--------- --------- ---------- --------
Plus: depreciation and amortization, excluding amortization
of deferred financing costs:
Restaurants................................................ 5,924 13,273 12,912 26,448
Asset management........................................... 1,239 1,129 1,996 4,835
General corporate.......................................... 1,358 1,158 5,153 5,387
--------- --------- ---------- --------
Consolidated depreciation and amortization, excluding
amortization of deferred financing costs................ 8,521 15,560 20,061 36,670
--------- --------- ---------- --------
EBITDA:
Restaurants................................................ 20,047 26,910 72,094 79,324
Asset management........................................... 2,722 3,328 3,607 11,472
General corporate.......................................... (20,316) (38,757) (52,906) (86,200)
--------- --------- ---------- --------
Consolidated EBITDA....................................... 2,453 (8,519) 22,795 4,596
Depreciation and amortization, excluding amortization
of deferred financing costs................................ (8,521) (15,560) (20,061) (36,670)
Interest expense.............................................. (10,516) (23,971) (34,171) (68,789)
Insurance expense related to long-term debt................... (991) -- (3,874) (2,294)
Loss on early extinguishment of debt.......................... -- (19) -- (35,809)
Investment income, net........................................ 14,223 25,060 21,662 55,336
Gain (costs) related proposed business acquisitions
not consummated............................................. -- (1,376) (793) (1,376)
Gain on sale of unconsolidated businesses..................... 97 79 154 13,068
Other income (expense), net................................... (645) 3,117 1,199 5,255
--------- --------- ---------- --------
Loss from continuing operations before income
taxes and minority interests............................ (3,900) (21,189) (13,089) (66,683)
Benefit from income taxes..................................... 924 4,886 17,483 16,533
Minority interests in income of consolidated subsidiaries..... (2,264) (2,756) (2,917) (8,762)
--------- --------- ---------- ---------
Income (loss) from continuing operations.................. (5,240) (19,059) 1,477 (58,912)
Gain on disposal of discontinued operations................... 1,641 2,814 12,464 3,285
--------- --------- ---------- --------
Net income (loss).........................................$ (3,599) $ (16,245) $ 13,941 $(55,627)
========= ========= ========== ========
<FN>
(d) The shares used to calculate diluted loss per share are the same as those
used to calculate basic loss per share for the 2005 fourth quarter, the
fiscal year of 2005 and for the 2004 fourth quarter since there were losses
from continuing operations and, therefore, the effects of all potentially
dilutive securities on the loss from continuing operations per share would
have been antidilutive. Had the Company reported income from continuing
operations for the 2005 fourth quarter, the fiscal year of 2005, and for
the 2004 fourth quarter, the shares used to calculate diluted income per
Class A common share would have been 25,087,000, 25,002,000 and 24,399,000,
respectively, reflecting the effect of dilutive stock options and, with
respect to the 2005 periods, contingently issuable restricted stock. The
shares used to calculate diluted income per Class B common share for those
periods would have been 54,988,000, 49,338,000 and 43,459,000,
respectively, also reflecting the effect of dilutive stock options and,
with respect to the 2005 periods, contingently issuable restricted stock.
The effects of dilutive stock options represented in such amounts reflect
the average price of the Company's stock during that period. The effects of
contingently issuable restricted stock reflect the price of the Company's
Class B common stock at January 1, 2006. 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 Convertible Notes
were 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.
(e) The reconciliation of certain operating measures of Deerfield before
purchase accounting and compensation expense related to equity interests
granted in asset management segment holding company adjustments to those
measures after such adjustments for the 2005 fourth quarter and fiscal
year, and 2004 fourth quarter and fiscal year ended follows:
</FN>
Depreciation and
Amortization,
Excluding
Asset Amortization
Management of Deferred
and Related Operating Financing
Fees(1) Profit(1) Costs(1) EBITDA(1)
---- ------ ----- --------
(In thousands)
For the quarter ended January 1, 2006:
Before purchase accounting and compensation
expense related to equity interests granted
in asset management segment holding
company adjustments (2) ....................... $27,854 $ 8,536 $ 108 $ 8,644
Expected asset management fees recorded as a
receivable in purchase accounting.............. (441) (441) -- (441)
Amortization of intangible assets recorded in
purchase accounting............................ -- (1,021) 1,021 --
Compensation expense related to equity interests
granted in asset management segment holding
company (4).................................... -- (4,875) -- (4,875)
------- ------ -------- ------
After purchase accounting and compensation
expense related to equity interests granted
in asset management segment holding
company adjustments............................$ 27,413 $ 2,199 $ 1,129 $ 3,328
======== ========= ======== ========
Depreciation and
Amortization,
Excluding
Asset Amortization
Management of Deferred
and Related Operating Financing
Fees(1) Profit(1) Costs(1) EBITDA(1)
---- ------ ----- --------
(In thousands)
For the fiscal year ended January 1, 2006
Before purchase accounting and compensation
expense related to equity interests granted
in asset management segment holding
company adjustments (2) ....................... $66,408 $ 17,022 $ 385 $ 17,407
Expected asset management fees recorded as a
receivable in purchase accounting.............. (1,083) (1,083) -- (1,083)
Cost of services recorded as a liability
in purchase accounting (3)..................... -- 146 -- 146
Write-off of pre-acquisition receivable........... -- (123) -- (123)
Amortization of intangible assets recorded in
purchase accounting............................ -- (4,450) 4,450 --
Compensation expense related to equity interests
granted in asset management segment holding
company (4).................................... -- (4,875) -- (4,875)
------- ------ -------- ------
After purchase accounting and compensation
expense related to equity interests granted
in asset management segment holding
company adjustments............................$ 65,325 $ 6,637 $ 4,835 $ 11,472
======== ========= ======== ========
For the quarter ended January 2, 2005:
Before purchase accounting adjustments ............ $18,908 $ 4,774 $ 83 $ 4,857
Expected asset management fees recorded as a
receivable in purchase accounting.............. (3,762) (3,762) -- (3,762)
Cost of services recorded as a liability in purchase
accounting (3) ................................ -- 1,627 -- 1,627
Amortization of intangible assets recorded in
purchase accounting............................ -- (1,156) 1,156 --
-------- --------- -------- --------
After purchase accounting adjustments..............$ 15,146 $ 1,483 $ 1,239 $ 2,722
======== ========= ======== ========
For the fiscal year ended January 2, 2005:
Before purchase accounting adjustments ............ $26,320 $ 6,052 $ 187 $ 6,239
Expected asset management fees recorded as a
receivable in purchase accounting.............. (4,259) (4,259) -- (4,259)
Cost of services recorded as a liability in purchase
accounting (3) ................................ -- 1,627 -- 1,627
Amortization of intangible assets recorded in
purchase accounting............................ -- (1,809) 1,809 --
-------- --------- -------- --------
After purchase accounting adjustments..............$ 22,061 $ 1,611 $ 1,996 $ 3,607
======== ========= ======== ========
<FN>
- ---------------
(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 $1.6 million for
the 2005 fourth quarter and $2.9 million for the fiscal year ended
January 2, 2006.
(3) Represents incentive compensation relating to the receivable recorded
in purchase accounting.
(4) On November 10, 2005, pursuant to an equity arrangement approved by
the compensation committee of our board of directors, certain members
of Triarc's management subscribed for equity interests in Deerfield,
each of which consists of a capital interest portion and a profits
interest portion. These interests have the effective result of
reducing our 61.5% interest in the profits of Deerfield to as low as
52.3%, depending on the level of Deerfield profits.
</FN>