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 SECOND QUARTER AND FIRST HALF 2006 RESULTS
o Arby's Systemwide Same Store Sales Increase
o Company-Owned Restaurants' Margins Improve Due To RTM Acquisition
o Deerfield Assets Under Management Continue To Grow
New York, NY, August 11, 2006 - Triarc Companies, Inc. (NYSE: TRY; TRY.B)
announced today the results of operations for its second fiscal quarter and
first fiscal half ended July 2, 2006.
Consolidated Highlights
o Consolidated revenues increased to $307.8 million in the 2006 second
quarter ($600.0 million in the 2006 first half) from $93.7 million in the
2005 second quarter ($181.4 million in the 2005 first half), 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 as
well as the impact of continued positive systemwide same-store sales, which
were up 2% in the 2006 second quarter (3% in the 2006 first half).
o Consolidated revenues were also positively impacted by increases in the
asset management and related fees of Deerfield & Company LLC ("Deerfield").
Deerfield's revenues increased to $15.8 million in the 2006 second quarter
($30.6 million in the 2006 first half) from $11.8 million in the 2005
second quarter ($24.7 million in the 2005 first half). This increase
principally reflects asset management fees from increased assets under
management in the 2006 periods.
o Partially offsetting the above increases was the effect of $7.6 million of
royalties and franchise fees paid by RTM to Arby's, LLC recognized in the
2005 second quarter ($14.4 million in the 2005 first half), while royalties
and franchise fees are eliminated in consolidation subsequent to the
acquisition of RTM.
o Consolidated net income increased to $3.1 million, or $0.03 per diluted
Class A and Class B, Series 1, share in the 2006 second quarter (net loss
of $(9.8) million in the 2006 first half or $(0.12) per diluted Class A and
Class B, Series 1, share), compared with net income of $0.4 million, or
$0.01 per diluted Class A and Class B, Series 1, share in the 2005 second
quarter (net income of $3.1 million, or $0.05 per diluted Class A and Class
B, Series 1, share in the 2005 first half). These changes primarily reflect
the revenue improvements discussed above, improved operating results for
our restaurant segment (driven by the RTM acquisition, higher same store
sales and improved operating efficiencies) and higher investment income.
These positive effects were partially offset in the 2006 second quarter and
fully offset in the 2006 first six months by the higher interest expense
resulting from the RTM acquisition, higher general and administrative
expenses (primarily related to our restaurant segment) as well as the
effects of a loss from the early extinguishment of debt principally related
to the effective conversion of $167,300,000 principal amount of the
Company's 5% Convertible Notes due 2023 ("Convertible Notes") and decreases
in gain on sale of unconsolidated business.
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
$27.7 million in the 2006 second quarter ($40.4 million in the 2006 first
half), compared with $8.3 million in the 2005 second quarter ($14.2 million
in the 2005 first half) primarily reflecting the improvements in restaurant
operations noted above. 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 $12.9 million in the 2006 second
quarter ($12.3 million in the 2006 first half), compared with $2.7 million
in the 2005 second quarter ($3.2 million in the 2005 first half), primarily
reflecting the impact of the RTM acquisition.
o Stock compensation expense was $3.7 million in the 2006 second quarter
($7.5 million in the 2006 first half) compared with $2.3 million in the
2005 second quarter ($2.7 million in the 2005 first half). The 2006 amounts
reflect our adoption of Statement of Financial Accounting Standards
No.123(R) at the beginning of fiscal 2006.
o Consolidated depreciation and amortization was $14.8 million in the 2006
second quarter ($28.1 million in the 2006 first half) versus $5.5 million
in the 2005 second quarter ($11.1 million in the 2005 first half). This
increase principally reflects the additional depreciation and amortization
related to the restaurants acquired in the RTM acquisition.
o Consolidated interest expense was $38.3 million in the 2006 second quarter
($65.6 million in the 2006 first half), compared with $12.5 million in the
2005 second quarter ($22.7 million in the 2005 first half). These increases
principally reflect an increase in the 2006 second quarter of $19.7 million
($30.5 million in the 2006 first half) resulting from the 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, as well as higher
average debt balances of the restaurant business as a result of the RTM
acquisition, partially offset by the effective conversion of a significant
portion of the Convertible Notes.
o Loss on the early extinguishment of debt of $0.9 million in the 2006 second
quarter ($13.5 million in the 2006 first half) related to a prepayment of
$45.0 million principal amount of our term loans in the 2006 second quarter
and, for the first six months, the effective conversion of $167,380,000
principal amount of the Company's Convertible Notes. The loss for the 2006
second quarter reflected the write-off of deferred financing costs and for
the 2006 first half reflected negotiated inducement premiums aggregating
$8.7 million and the write-off of $4.8 million of deferred financing costs.
o 2006 first half results include a gain of $2.3 million versus a gain of
$12.7 million in the 2005 first half, relating to sales of common stock of
Encore Capital Group, Inc. (NASDAQ: ECPG), an equity investment of the
Company. The Company owned approximately 4.3% of Encore's outstanding
shares as of July 2, 2006.
o Consolidated net investment income increased to $30.8 million in the 2006
second quarter ($51.7 million in the 2006 first half), compared with $7.6
million in the 2005 second quarter ($16.7 million in the 2005 first half).
This increase primarily reflects an increase in interest income principally
due to the activity of the Opportunities Fund and, to a lesser extent, an
increase in average rates on the Company's interest-bearing investments.
The increases in investment income from the Opportunities Fund ($21.4
million for the 2006 second quarter and $34.2 million for the 2006 first
half) were substantially offset by the increases in interest expense
related to the Opportunities Fund noted above.
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, the net sales of our restaurant operations
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 Systemwide same-store sales were up 2% in the 2006 second quarter (3% in
the 2006 first half) versus an increase of 3% in the 2005 second quarter
(3% in the 2005 first half). We currently expect systemwide same-store
sales to be positive for the 2006 fiscal year due to the anticipated
performance of the various marketing and new product initiatives described
below as well as the impact of value oriented promotions primarily on some
of our roast beef sandwiches and limited time menu offerings.
o Net sales from the company-owned Arby's restaurants were $270.8 million in
the 2006 second quarter ($529.7 million in the 2006 first half), compared
with $55.0 million in the 2005 second quarter ($106.2 million in the 2005
first half).
o The increase in sales from company-owned restaurants in the 2006 second
quarter of $215.8 million ($423.5 million in the 2006 first half) reflects
the effect of the acquisition of RTM. Same-store sales for company-owned
restaurants were relatively flat in both the 2006 second quarter and in the
2006 first half, compared with strong increases in the 2005 second quarter
and 2005 first half, primarily reflecting the continued underperformance of
company-owned stores in the economically-weaker Michigan and Ohio regions,
as well as the negative impact on sales of lower discretionary consumer
spending due to higher fuel costs in the 2006 second quarter and 2006 first
half. These negative factors were partially offset by the effect of recent
marketing initiatives, including new menu boards, and the March 2006 launch
of Arby's Chicken Naturals(TM), a line of menu offerings made with 100
percent all natural chicken.
o 2006 second quarter same-store sales for franchised restaurants increased
3% (5% in the 2006 first half), compared to 3% in the 2005 second quarter
(3% in the 2005 first half). The increase in same-store sales of the
franchised restaurants reflects more effective and targeted local marketing
campaigns, including increased couponing by our franchisees as well as the
positive impact of the recent marketing initiatives and the launch of
Arby's Chicken Naturals discussed above, partially offset by the negative
impact on sales of lower discretionary consumer spending due to higher fuel
costs in the 2006 second quarter and first half.
o Royalties and franchise and related fees decreased to $21.2 million in the
2006 second quarter ($39.6 million in the 2006 first half), compared with
$26.9 million in the 2005 second quarter ($50.5 million in the 2005 first
half), due to the elimination in consolidation of royalties and franchise
and related fees from RTM after the July 2005 acquisition partially offset
by the effects of the increase in same-store sales of franchised
restaurants and net openings of franchised restaurants.
o The gross margin for our company-owned restaurants increased to 28% of
sales in the 2006 second quarter (27% in the 2006 first half) from 25% in
the 2005 second quarter (24% in the 2005 first half). This increase
principally reflects the impact of the stores acquired in the RTM
acquisition and 32 net restaurants added since the acquisition, which
combined had a gross margin of 29% in the 2006 second quarter (28% in the
2006 first half). We expect the gross margin for our company-owned
restaurants to continue to improve for the remainder of 2006 reflecting
both the inclusion of RTM and improving operational efficiencies.
o Our restaurant business operating profit increased to $26.8 million in the
2006 second quarter ($45.8 million in the 2006 first half) versus $19.9
million in the 2005 second quarter ($34.0 million in the 2005 first half)
reflecting the impact of the stores acquired in the RTM acquisition and 32
net restaurants added since the acquisition.
o Depreciation and amortization for our restaurant operations was $12.3
million in the 2006 second quarter ($23.1 million in the 2006 first half)
versus $2.6 million in the 2005 second quarter ($5.5 million in the 2005
first half). This increase reflects the additional depreciation and
amortization related to the restaurants acquired in the RTM acquisition and
32 net restaurants added since the acquisition.
o Restaurant business EBITDA was $39.0 million in the 2006 second quarter
($68.9 million in the 2006 first half), compared with $22.4 million in the
2005 second quarter ($39.5 million in the 2005 first half) primarily
reflecting the RTM acquisition and 32 net restaurants added since the
acquisition. Restaurant business EBITDA is reconciled to consolidated
EBITDA which, in turn, is reconciled to consolidated net income (loss), in
the attached table.
o In the 2006 second quarter, the Arby's system opened 31 new units (51 in
the 2006 first half) and closed 12 (31 in the 2006 first half) generally
underperforming units. We plan to open 30 new company-owned units during
the remainder of 2006. As of July 2, 2006, Arby's had commitments from
franchisees to build 272 new units through 2012, which excludes prior
commitments from RTM to build 144 new units.
Asset Management Highlights
o Triarc accounts for Deerfield, its asset management business, as a
consolidated subsidiary with a minority interest. For the 2006 second
quarter, 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, for the 2006 second quarter, compensation expense related
to equity interests granted in November 2005 in our asset management
segment holding company and before the effect of minority interests, were
$15.8 million, $1.7 million, $1.4 million and $3.1 million, respectively.
For the 2005 second quarter, those amounts were $11.8 million, $0.1
million, $1.5 million and $1.6 million, respectively. For the 2006 first
half, those amounts were $30.6 million, $2.3 million, $2.9 million and $5.2
million, respectively, compared to $24.7 million, $3.0 million, $2.6
million and $5.6 million, respectively, in the first half of 2005. The
decreases in operating profit and EBITDA for the first half of 2006 versus
the prior year period reflected an increase in general and administrative
expenses due to the hiring of additional personnel to support the growth in
assets under management and the November 2005 grant of equity interests
noted above. 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, for the 2006 second quarter, compensation
expense related to the equity interests noted above, Deerfield's asset
management and related fees, operating profit, depreciation and
amortization and EBITDA, before the effect of minority interests, were
$15.8 million, $3.2 million, $0.4 million and $3.7 million, respectively.
For the 2005 second quarter, those amounts were $11.9 million, $1.6
million, $0.1 million and $1.7 million, respectively. For the 2006 first
half, those amounts were $30.6 million, $5.8 million, $0.9 million and $6.7
million, respectively, compared to $25.4 million, $5.9 million, $0.2
million and $6.1 million, respectively in the first half of 2005. 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
grant of equity interests in our subsidiary Triarc Deerfield Holdings, LLC,
which is the majority owner of Deerfield.
o As of August 1, 2006, Deerfield had approximately $13.7 billion of assets
under management ("AUM"), of which approximately $124.1 million was
attributable to investments by Triarc. Deerfield's AUM at August 1, 2006
consisted of approximately $11.6 billion in 25 CDOs and a structured loan
fund, approximately $996.3 million in five hedge funds, approximately
$763.8 million in a real estate investment trust and approximately $294.1
million in several managed accounts.
o Deerfield Triarc Capital Corp. ("Deerfield Triarc," NYSE: DFR), the
publicly traded real estate investment trust managed by Deerfield that
invests in real estate-related securities and various other asset classes,
had $763.8 million in assets under management as of August 1, 2006. Triarc
and its subsidiaries beneficially own approximately 2.8% of Deerfield
Triarc's common stock.
Commenting on asset management operations, Nelson Peltz, Triarc's Chairman
and Chief Executive Officer, said: "Deerfield posted another solid quarter and
we are pleased with the continued growth in Deerfield's assets under management.
Together with Greg Sachs and his team, we believe we have built much value at
Deerfield since we acquired our interest in July 2005, which will accrue to our
shareholders."
Commenting on Arby's, Peter May, Triarc's President and Chief Operating
Officer, said: "Arby's results were encouraging and we believe we are starting
to see the benefits of the RTM integration. In addition, over the last several
months, Arby's newly appointed CEO Roland Smith has worked quickly and
effectively to strengthen his senior team and refine strategic goals, thus
better positioning us for the Triarc corporate restructuring."
Commenting on Triarc's corporate restructuring, Peltz said: "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 corporate restructuring that may involve the spin-off to
Triarc's stockholders or other disposition of Triarc's interest in Deerfield. We
look forward to updating our shareholders on our progress as soon as
practicable."
Peltz added: "Earlier this year, in connection with the 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. The second installment, in the amount of $0.15 per
share, was paid on July 14, 2006. We currently intend to pay the third $0.15 per
share installment during the fourth quarter of 2006. In addition, we recently
completed the effective conversion of substantially all of our 5% Convertible
Notes due 2023. This had the effect of reducing consolidated debt by
approximately $167.4 million 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 $13.7 billion under management as of August 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 in this press release 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 that RTM will be successfully integrated into our
existing operations.
8. There can be no assurance that we will build 30 additional new
company-owned units in the remainder of 2006 or that our franchisees will
honor their commitments to build 272 restaurants through 2012.
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.
10. There can be no assurance that any additional special cash dividends will
be declared or paid. The future installment of the special cash dividend
referred to in this press release (including the actual amounts thereof)
and any other future dividends are subject to applicable law, will be made
at the discretion of the Board and will be based on such factors as
Triarc's earnings, financial condition, cash requirements and other
factors, including whether such future installments of the special
dividends would result in a material adjustment to the conversion price of
Triarc's 5% Convertible Notes due 2023.
11. 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 pressure 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 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 successfully;
o changes in business strategy or development plans, and the willingness of
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 (or lack of availability of
additional key personnel if needed for expansion), 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,
inability to hire the necessary additional personnel 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 1, 2006 (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
Second Quarter and Six Months Ended July 3, 2005 and July 2, 2006(a)
Second Quarter Ended Six Months Ended
-------------------- ----------------
2005 2006 2005 2006
---- ---- ---- ----
(In thousands except per share amounts)
(Unaudited)
Revenues:
Net sales............................................$ 54,989 $ 270,767 $ 106,179 $ 529,726
Royalties and franchise and related fees............. 26,947 21,234 50,526 39,622
Asset management and related fees.................... 11,787 15,828 24,715 30,624
--------- --------- --------- ---------
93,723 307,829 181,420 599,972
--------- --------- --------- ---------
Costs and expenses:
Cost of sales, excluding depreciation and
amortization....................................... 41,038 194,375 80,227 386,949
Cost of services, excluding depreciation and
amortization....................................... 4,614 5,910 8,763 11,430
Advertising and selling.............................. 4,427 19,881 9,010 39,983
General and administrative, excluding depreciation
and amortization................................... 35,374 58,563 69,188 118,930
Depreciation and amortization, excluding
amortization of deferred financing costs........... 5,541 14,751 11,067 28,132
Facilities relocation and corporate restructuring.... -- 775 -- 1,578
Loss on settlement of unfavorable franchise rights... -- 658 -- 658
--------- --------- --------- ---------
90,994 294,913 178,255 587,660
--------- --------- --------- ---------
Operating profit................................. 2,729 12,916 3,165 12,312
Interest expense....................................... (12,484) (38,246) (22,737) (65,622)
Insurance expense related to long-term debt............ (859) -- (1,763) --
Loss on early extinguishment of debt................... -- (933) -- (13,477)
Investment income, net................................. 7,576 30,796 16,676 51,746
Gain on sale of unconsolidated businesses.............. 3,056 -- 12,664 2,256
Other income, net...................................... 1,483 3,699 1,113 5,436
--------- --------- --------- ---------
Income (loss) from continuing operations before
income taxes and minority interests ........... 1,501 8,232 9,118 (7,349)
Benefit from (provision for) income taxes.............. (497) (2,532) (3,010) 3,234
Minority interests in income of consolidated subsidiaries (1,056) (2,608) (3,481) (5,698)
---------- --------- --------- ---------
Income (loss) from continuing operations......... (52) 3,092 2,627 (9,813)
Gain on disposal of discontinued operations............ 471 -- 471 --
--------- --------- --------- ---------
Net income (loss)................................$ 419 $ 3,092 $ 3,098 (9,813)
========= ========= ========= =========
EBITDA (b).............................................$ 8,270 $ 27,667 $ 14,232 $ 40,444
========= ========= ========= =========
Basic income (loss) per share: Class A common stock:
Continuing operations..............................$ -- $ .03 $ .04 $ (.12)
Discontinued operations............................ .01 -- .01 --
--------- -------- -------- ---------
Net income (loss)..................................$ .01 $ .03 $ .05 $ (.12)
========= ======== ======== =========
Class B common stock:
Continuing operations..............................$ -- $ .04 $ .04 $ (.12)
Discontinued operations............................ .01 -- .01 --
--------- -------- -------- ---------
Net income (loss)..................................$ .01 $ .04 $ .05 $ (.12)
========= ======== ======== =========
Diluted income (loss) per share of Class A common stock and Class B common
stock:
Continuing operations..............................$ -- $ .03 $ .04 $ (.12)
Discontinued operations............................ .01 -- .01 --
--------- -------- -------- ---------
Net income (loss)..................................$ .01 $ .03 $ .05 $ (.12)
========= ======== ======== =========
Shares used to calculate income (loss) per share:
Class A common stock
Basic.............................................. 23,749 27,622 23,729 26,795
========= ========= ========= =========
Diluted............................................ 23,749 (c) 28,583 24,913 26,795 (c)
========= ========= ========= =========
Class B common stock
Basic.............................................. 41,921 59,939 41,882 58,141
========= ========= ========= =========
Diluted............................................ 41,921 (c) 62,816 44,656 58,141 (c)
========= ========= ========= =========
<FN>
(a) On July 25, 2005, the Company completed the acquisition of the 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 2006
second quarter and first half 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 2005 second quarter and first half, however,
include royalties and franchise and related fees from RTM but do not
include RTM's results.
(b) The calculation of EBITDA by segment and a reconciliation of
consolidated EBIDTA to net income or loss follow:
</FN>
Second Quarter Ended Six Months Ended
-------------------- ----------------
2005 2006 2005 2006
---- ---- ---- ----
(In thousands)
Operating profit (loss):
Restaurants................................................$ 19,879 $ 26,774 $ 34,006 $ 45,801
Asset management .......................................... 111 1,648 2,951 2,273
General corporate.......................................... (17,261) (15,506) (33,792) (35,762)
--------- --------- ---------- --------
Consolidated operating profit............................. 2,729 12,916 3,165 12,312
--------- --------- ---------- --------
Plus: depreciation and amortization, excluding amortization
of deferred financing costs:
Restaurants................................................ 2,553 12,251 5,489 23,064
Asset management........................................... 1,534 1,448 2,617 2,931
General corporate.......................................... 1,454 1,052 2,961 2,137
--------- --------- ---------- --------
Consolidated depreciation and amortization, excluding
amortization of deferred financing costs................ 5,541 14,751 11,067 28,132
--------- --------- ---------- --------
EBITDA:
Restaurants................................................ 22,432 39,025 39,495 68,865
Asset management........................................... 1,645 3,096 5,568 5,204
General corporate.......................................... (15,807) (14,454) (30,831) (33,625)
--------- --------- ---------- --------
Consolidated EBITDA....................................... 8,270 27,667 14,232 40,444
Depreciation and amortization, excluding amortization
of deferred financing costs................................ (5,541) (14,751) (11,067) (28,132)
Interest expense.............................................. (12,484) (38,246) (22,737) (65,622)
Insurance expense related to long-term debt................... (859) -- (1,763) --
Loss on early extinguishment of debt.......................... -- (933) -- (13,477)
Investment income, net........................................ 7,576 30,796 16,676 51,746
Gain on sale of unconsolidated businesses..................... 3,056 -- 12,664 2,256
Other income, net............................................. 1,483 3,699 1,113 5,436
--------- --------- ---------- --------
Income (loss) from continuing operations before income
taxes and minority interests............................ 1,501 8,232 9,118 (7,349)
Benefit from (provision for) income taxes..................... (497) (2,532) (3,010) 3,234
Minority interests in income of consolidated subsidiaries..... (1,056) (2,608) (3,481) (5,698)
--------- --------- ---------- --------
Income (loss) from continuing operations.................. (52) 3,092 2,627 (9,813)
Gain on disposal of discontinued operations................... 471 -- 471 --
--------- --------- ---------- --------
Net income (loss).........................................$ 419 $ 3,092 $ 3,098 $ (9,813)
========= ========= ========== ========
<FN>
(c) The shares used to calculate diluted loss per share are the same as those
used to calculate basic loss per share for the 2006 first six months and
second quarter 2005 since there was a loss from continuing operations and,
therefore, the effects of all potentially dilutive securities on the loss
from continuing operations per share would have been antidilutive.
(d) 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 2006 second quarter and first six
months, and 2005 second quarter and first six months 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 July 2, 2006:
Before adjustments for purchase accounting and
compensation expense related to equity interests
granted in asset management segment holding
company (2) ................................... $15,802 $ 3,225 $ 426 $ 3,651
Expected asset management fees recorded as a
receivable in purchase accounting.............. 26 26 -- 26
Amortization of intangible assets recorded in
purchase accounting............................ -- (1,022) 1,022 --
Compensation expense related to equity interests
granted in asset management segment holding
company (3).................................... -- (581) -- (581)
------- --------- -------- --------
After adjustments for purchase accounting and
compensation expense related to equity interests
granted in asset management segment holding
company........................................$ 15,828 $ 1,648 $ 1,448 $ 3,096
======== ========= ======== ========
For the six months ended July 2, 2006:
Before adjustments for purchase accounting and
compensation expense related to equity interests
granted in asset management segment holding
company (2) ................................... $30,573 $ 5,845 $ 887 $ 6,732
Expected asset management fees recorded as a
receivable in purchase accounting.............. 51 51 -- 51
Amortization of intangible assets recorded in
purchase accounting............................ -- (2,044) 2,044 --
Compensation expense related to equity interests
granted in asset management segment holding
company (3).................................... -- (1,579) -- (1,579)
------- --------- -------- --------
After adjustments for purchase accounting and
compensation expense related to equity interests
granted in asset management segment holding
company........................................$ 30,624 $ 2,273 $ 2,931 $ 5,204
======== ========= ======== ========
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 July 3, 2005:
Before purchase accounting adjustments (2) ........ $11,878 $ 1,639 $ 97 $ 1,736
Expected asset management fees recorded as a
receivable in purchase accounting.............. (91) (91) -- (91)
Amortization of intangible assets recorded in
purchase accounting............................ -- (1,437) 1,437 --
-------- --------- -------- --------
After purchase accounting adjustments..............$ 11,787 $ 111 $ 1,534 $ 1,645
======== ========= ======== ========
For the six months ended July 3, 2005:
Before purchase accounting adjustments (2) ........ $25,383 $ 5,909 $ 181 $ 6,090
Expected asset management fees recorded as a
receivable in purchase accounting.............. (668) (668) -- (668)
Cost of services recorded as a liability
in purchase accounting (4)..................... -- 146 -- 146
Amortization of intangible assets recorded in
purchase accounting............................ -- (2,436) 2,436 --
-------- --------- -------- --------
After purchase accounting adjustments..............$ 24,715 $ 2,951 $ 2,617 $ 5,568
======== ========= ======== ========
<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 $0.5 million for
the 2006 second quarter, $0.9 million for the six months ended July
2, 2006, $0.4 million for the 2005 second quarter and $0.8 million
for the six months ended July 3, 2005.
(3) 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.
(4) Represents incentive compensation relating to the receivable recorded
in purchase accounting.
</FN>