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 THIRD QUARTER AND NINE MONTHS 2006 RESULTS
o Arby's(R) Systemwide Same Store Sales Increase
o Deerfield Assets Under Management Continue To Grow
New York, NY, November 13, 2006 - Triarc Companies, Inc. (NYSE: TRY; TRY.B)
announced today the results of operations for its third fiscal quarter and first
nine months ended October 1, 2006.
Consolidated Highlights
o Consolidated revenues increased to $311.9 million in the 2006 third quarter
($911.8 million in the 2006 first nine months) from $240.4 million in the
2005 third quarter ($421.8 million in the 2005 first nine months),
primarily reflecting the full-period effect of the July 25, 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 net
additional stores and continued positive systemwide same-store sales, which
were up 5% in the 2006 third quarter (4% in the 2006 first nine months).
o Consolidated revenues were also positively impacted by increases in the
assets under management and related fees of Deerfield & Company LLC
("Deerfield"). Deerfield's revenues increased to $17.8 million in the 2006
third quarter ($48.4 million in the 2006 first nine months) from $13.2
million in the 2005 third quarter ($37.9 million in the 2005 first nine
months). This increase principally reflects asset management fees from
increased assets under management, including new investment vehicles, and
improved performance in the 2006 periods.
o Partially offsetting the above increases was the effect of $1.9 million of
royalties and franchise fees paid by RTM to Arby's, LLC recognized prior to
the acquisition date in the 2005 third quarter ($16.3 million in the 2005
first nine months), while royalties and franchise fees are eliminated in
consolidation subsequent to the acquisition of RTM.
o Consolidated net income improved to $0.5 million, or $0.01 per diluted
Class A and Class B share in the 2006 third quarter (net loss of $(9.3)
million in the 2006 first nine months or $(0.11) per diluted Class A and
Class B share), compared with a net loss of $(42.5) million, or $(0.58) per
diluted Class A and Class B share in the 2005 third quarter (net loss of
$(39.4) million, or $(0.58) per diluted Class A and Class B share in the
2005 first nine months). These changes primarily reflect the after-tax
effects of the revenue improvements discussed above and decreases in losses
on the early extinguishment of debt and settlement of unfavorable franchise
rights (i.e., the acquisition from franchisees of restaurants with
franchise agreements that provided for a less than 4% royalty rate) as
further described below.
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)
increased to $28.8 million in the 2006 third quarter ($69.2 million in the
2006 first nine months), compared with $(1.1) million in the 2005 third
quarter ($13.1 million in the 2005 first nine months), primarily reflecting
the prior period loss on the settlement of unfavorable franchise rights and
the other effects of the RTM acquisition. The attached table provides the
calculation of EBITDA and a reconciliation of EBITDA to our consolidated
net income (loss).
o Consolidated operating profit (loss) increased to $12.5 million in the 2006
third quarter ($24.8 million in the 2006 first nine months), compared with
$(11.2) million in the 2005 third quarter ($(8.0) million in the 2005 first
nine months), primarily reflecting the prior period loss on the settlement
of unfavorable franchise rights and the other effects of the RTM
acquisition.
o Share-based compensation expense was $3.3 million in the 2006 third quarter
($10.8 million in the 2006 first nine months) compared with $2.8 million in
the 2005 third quarter ($5.5 million in the 2005 first nine months). 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 $16.3 million in the 2006
third quarter ($44.4 million in the 2006 first nine months) versus $10.0
million in the 2005 third quarter ($21.1 million in the 2005 first nine
months). This increase principally reflects the additional depreciation and
amortization related to the restaurants acquired in the RTM acquisition and
$2.2 million of asset impairment charges in the 2006 third quarter and
first nine months.
o In the 2006 third quarter, we recognized facilities relocation and
corporate restructuring charges of $2.1 million ($3.7 million in the 2006
first nine months) compared with $6.4 million in the 2005 periods. The 2005
charges related to the combination of our restaurant operations with those
of RTM following the RTM acquisition. The 2006 charges related to our
decision not to move our corporate offices to a leased facility in Rye
Brook, New York and additional charges related to the combination of our
restaurant operations.
o A loss on the settlement of unfavorable franchise rights of $17.0 million
was recognized in the 2005 third 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 that were below the current 4% royalty rate that Arby's receives on
new franchise agreements were required to be valued and recognized as an
expense and excluded from the purchase price paid for RTM. A charge for a
loss on the settlement of unfavorable franchise rights of $0.7 million
related to other restaurant acquisitions was recognized in the 2006 second
quarter.
o Consolidated interest expense was $34.4 million in the 2006 third quarter
($100.0 million in the 2006 first nine months), compared with $22.1 million
in the 2005 third quarter ($44.8 million in the 2005 first nine months).
These increases principally reflect an increase in the 2006 third quarter
of $13.2 million ($43.7 million in the 2006 first nine months) resulting
from the activity of the Deerfield Opportunities Fund (the "Opportunities
Fund"), a multi-strategy hedge fund managed by Deerfield in which the
Company had an investment and which employed leverage in its investment
strategies, as well as higher average debt balances of the restaurant
business following a refinancing in connection with the RTM acquisition,
partially offset by the conversion of a significant portion of the
Company's 5% Convertible Notes due 2023 (the "Convertible Notes"). As of
September 29, 2006, we effectively redeemed our investment in the
Opportunities Fund and no longer consolidate the operations of the
Opportunities Fund.
o The losses on early extinguishment of debt in the 2006 third quarter and
first nine months totaled $0.2 million and $13.7 million, respectively. The
loss on early extinguishment of debt in the 2006 first nine months related
to the effective conversion of $167.4 million principal amount of the
Convertible Notes and prepayments of $51.0 million principal amount of our
term loans and included $8.7 million of negotiated inducement premiums and
the write-off of $4.9 million of deferred financing costs. The loss in the
2005 periods totaled $35.8 million due to the July 2005 debt refinancing in
connection with the RTM acquisition. The loss for the 2005 periods
principally consisted of prepayment penalties of $27.4 million, the
write-off of $4.8 million in deferred financing costs and $3.5 million of
insurance payments related to the extinguished debt.
o The 2006 first nine months results include a gain of $2.3 million compared
with a gain of $13.0 million in the 2005 first nine months, principally
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 October 1, 2006.
o Consolidated net investment income increased to $23.0 million in the 2006
third quarter ($74.8 million in the 2006 first nine months), compared with
$13.6 million in the 2005 third quarter ($30.3 million in the 2005 first
nine months). 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 increase in investment income from the
Opportunities Fund of $10.0 million for the third quarter and $44.1 million
for the 2006 first nine months was offset by the increase 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 5% in the 2006 third quarter (4% in the
2006 first nine months) versus a decrease of 4% in the 2005 third quarter
(an increase of 1% in the 2005 first nine months). We currently expect
systemwide same-store sales to be positive for the remainder of 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 $272.7 million in
the 2006 third quarter ($802.4 million in the 2006 first nine months),
compared with $206.1 million in the 2005 third quarter ($312.3 million in
the 2005 first nine months).
o The increase in sales from company-owned restaurants in the 2006 third
quarter of $66.6 million ($490.1 million in the 2006 first nine months)
reflects the effect of the acquisition of RTM as well as the addition of 29
net company-owned restaurants since October 2, 2005. Same-store sales for
company-owned restaurants increased 2% and 1%, respectively, in the 2006
third quarter and in the 2006 first nine months, compared to the same
periods in 2005. The increases primarily reflect the effect of value
oriented promotions and limited time offerings and the March 2006 launch of
Arby's Chicken Naturals(TM), a line of menu offerings made with 100 percent
all natural chicken, partially offset by 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 2006 first nine months.
o 2006 third quarter same-store sales for franchised restaurants increased 6%
(5% in the 2006 first nine months), compared to the same periods in 2005.
The 2006 increases 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 third
quarter and first nine months.
o Royalties and franchise and related fees increased to $21.4 million in the
2006 third quarter ($61.0 million in the 2006 first nine months), compared
with $21.0 million in the 2005 third quarter ($71.5 million in the 2005
first nine months), due to the effects of the increase in same-store sales
of franchised restaurants and net openings of franchised restaurants. The
decline in the 2006 nine months results reflects 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 was 27% of sales both in
the 2006 third quarter and the 2006 first nine months as compared to 28% in
the 2005 third quarter and 27% in the 2005 first nine months. The decrease
in the 2006 third quarter principally reflects the effect of increased
price discounting associated with Arby's value oriented menu offerings and
increases in utility and payroll costs, partially offset by the positive
effect of our continuing implementation of more effective operational
procedures, increased beverage rebates and decreases in the cost of roast
beef.
o Our restaurant business operating profit increased to $25.7 million in the
2006 third quarter ($71.5 million in the 2006 first nine months) versus
$5.2 million in the 2005 third quarter ($39.2 million in the 2005 first
nine) principally reflecting the prior period loss on the settlement of
unfavorable franchise rights and the other effects of the RTM acquisition.
o Depreciation and amortization for our restaurant operations was $13.5
million in the 2006 third quarter ($36.6 million in the 2006 first nine
months) versus $7.7 million in the 2005 third quarter ($13.2 million in the
2005 first nine months). This increase principally reflects the additional
depreciation and amortization related to the restaurants acquired in the
RTM acquisition and $1.9 million of impairment charges in the 2006 third
quarter principally related to two underperforming restaurants.
o Restaurant business EBITDA was $39.2 million in the 2006 third quarter
($108.1 million in the 2006 first nine months), compared with $12.9 million
in the 2005 third quarter ($52.4 million in the 2005 first nine months)
primarily reflecting the prior period loss on the settlement of unfavorable
franchise rights and the other effects of the RTM 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 third quarter, the Arby's system opened 42 new units (93 in the
2006 first nine months) and closed 9 (40 in the 2006 first nine months)
generally underperforming units. We plan to open 18 additional new
company-owned units during the remainder of 2006. As of October 1, 2006,
Arby's had commitments from franchisees to build 251 new units through
2012, which excludes prior commitments from RTM to build 136 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 third
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 compensation expense related to equity interests granted
to Triarc's management in November 2005 in our asset management segment
holding company and before the effect of minority interests, were $17.8
million, $2.1 million, $1.7 million, $3.8 million, respectively. For the
2005 third quarter, those amounts were $13.2 million, $1.5 million, $1.1
million and $2.6 million, respectively. For the 2006 first nine months,
those amounts were $48.4 million, $4.3 million, $4.6 million and $9.0
million, respectively, compared to $37.9 million, $4.4 million, $3.7
million and $8.1 million, respectively, in the first nine months of 2005.
The decreases in operating profit and EBITDA for the first nine months 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 For the 2006 third quarter, excluding the effects of purchase accounting
associated with the Deerfield acquisition in July 2004 and 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 $17.7
million, $3.9 million, $0.4 million and $4.4 million, respectively. For the
2005 third quarter, those amounts were $13.2 million, $2.6 million, $0.1
million and $2.7 million, respectively. For the 2006 first nine months,
those amounts were $48.3 million, $9.8 million, $1.3 million and $11.1
million, respectively, compared to $38.6 million, $8.5 million, $0.3
million and $8.8 million, respectively, in the first nine months 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 October 1, 2006, Deerfield had approximately $14.1 billion of assets
under management ("AUM"), of which approximately $19.1 million was
attributable to investments by Triarc. Deerfield's AUM at October 1, 2006
consisted of approximately $12.1 billion in 25 CDOs and a structured loan
fund, approximately $862.2 million in four hedge funds, approximately
$763.8 million in a real estate investment trust and approximately $329.0
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 October 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: "We are pleased with the significant growth
that Deerfield has achieved over the last two years. As a result, we believe
Deerfield has a great future. Together with Deerfield's Chairman and CEO,
Gregory Sachs, and his team, we believe we have built much value at Deerfield
since we acquired our interest in July 2004, which will accrue to our
shareholders."
Commenting on Arby's, Peter May, Triarc's President and Chief Operating
Officer, said: "Arby's results continue to be encouraging and we are excited
about the many opportunities that lie ahead for 2007, including the possibility
of Triarc being a standalone restaurant company."
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 is expected to involve the
disposition of our ownership interest in Deerfield through a sale, spin-off to
shareholders or other means. We look forward to updating our shareholders on our
progress."
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 $14.1 billion under management as of October 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 we will build 18 additional new
company-owned units in the remainder of 2006 or that our franchisees will
honor their commitments to build 251 new restaurants through 2012.
8. 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.
9. The statements in this press release that are not historical facts,
including, most importantly, information concerning possible or assumed
future results of operations of Triarc Companies, Inc. and its subsidiaries
(collectively, "Triarc" or the "Company") and statements preceded by,
followed by, or that include the words "may," "believes," "plans,"
"expects," "anticipates" or the negation thereof, or similar expressions,
constitute "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995 (the "Reform Act"). All statements
that address operating performance, events or developments that are
expected or anticipated to occur in the future, including statements
relating to revenue growth, earnings per share growth or statements
expressing general optimism about future operating results, are
forward-looking statements within the meaning of the Reform Act. These
forward-looking statements are based on our current expectations, speak
only as of the date of this press release and are susceptible to a number
of risks, uncertainties and other factors. Our actual results, performance
and achievements may differ materially from any future results, performance
or achievements expressed or implied by such forward-looking statements.
For those statements, we claim the protection of the safe harbor for
forward-looking statements contained in the Reform Act. Many important
factors could affect our future results and could cause those results to
differ materially from those expressed in the forward-looking statements
contained herein. Such factors include, but are not limited to, the
following:
o competition, including pricing pressures and the potential impact of
competitors' new units on sales by Arby's(R) restaurants;
o consumers' perceptions of the relative quality, variety and value of the
food products 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, supply, distribution and
other operating costs;
o 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 our Annual Report on Form 10-K for the fiscal year ended January
1, 2006 (see especially "Item 1A. 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
Third Quarter and Nine Months Ended October 2, 2005 and October 1, 2006(a)
Third Quarter Ended Nine Months Ended
------------------- -----------------
2005 2006 2005 2006
---- ---- ---- ----
(In thousands except per share amounts)
(Unaudited)
Revenues:
Net sales............................................$ 206,139 $ 272,708 $ 312,318 $ 802,434
Royalties and franchise and related fees............. 21,020 21,403 71,546 61,025
Asset management and related fees.................... 13,197 17,766 37,912 48,390
--------- --------- --------- ---------
240,356 311,877 421,776 911,849
--------- --------- --------- ---------
Costs and expenses:
Cost of sales, excluding depreciation and
amortization....................................... 148,162 197,889 228,389 584,838
Cost of services, excluding depreciation and
amortization....................................... 4,610 7,313 13,373 18,743
Advertising and selling.............................. 15,150 19,882 24,160 59,865
General and administrative, excluding depreciation
and amortization................................... 50,113 55,871 119,301 174,801
Depreciation and amortization, excluding
amortization of deferred financing costs........... 10,043 16,299 21,110 44,431
Facilities relocation and corporate restructuring.... 6,414 2,165 6,414 3,743
Loss on settlement of unfavorable franchise rights... 17,024 -- 17,024 658
--------- --------- --------- ---------
251,516 299,419 429,771 887,079
--------- --------- --------- ---------
Operating profit (loss).......................... (11,160) 12,458 (7,995) 24,770
Interest expense....................................... (22,081) (34,426) (44,818) (100,048)
Insurance expense related to long-term debt............ (531) -- (2,294) --
Loss on early extinguishment of debt................... (35,790) (194) (35,790) (13,671)
Investment income, net................................. 13,600 23,021 30,276 74,767
Gain on sale of unconsolidated businesses.............. 325 3 12,989 2,259
Other income, net...................................... 1,025 318 2,138 5,754
--------- --------- --------- ---------
Income (loss) from continuing operations before
income taxes and minority interests ........... (54,612) 1,180 (45,494) (6,169)
Benefit from income taxes.............................. 14,657 344 11,647 3,578
Minority interests in income of consolidated subsidiaries (2,525) (976) (6,006) (6,674)
--------- --------- --------- ---------
Income (loss) from continuing operations......... (42,480) 548 (39,853) (9,265)
Gain on disposal of discontinued operations............ -- -- 471 --
--------- --------- --------- ---------
Net income (loss)................................$ (42,480) $ 548 $ (39,382) $ (9,265)
========= ========= ========= ========
EBITDA (b).............................................$ (1,117) $ 28,757 $ 13,115 $ 69,201
========= ========= ========= =========
Basic and diluted income (loss) per share of Class A common stock and Class B
common stock:
Continuing operations..............................$ (.58) $ .01 $ (.59) $ (.11)
Discontinued operations............................ -- -- .01 --
--------- -------- -------- ---------
Net income (loss)..................................$ (.58) $ .01 $ (.58) $ (.11)
========= ======== ======== =========
Shares used to calculate income (loss) per share:
Class A common stock
Basic.............................................. 23,786 27,672 23,748 27,087
========= ========= ========= =========
Diluted............................................ 23,786 (c) 28,716 23,748 (c) 27,087 (c)
========= ========= ========= =========
Class B common stock
Basic.............................................. 49,442 60,184 44,402 58,822
========= ========= ========= =========
Diluted............................................ 49,442 (c) 62,857 44,402 (c) 58,822 (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 third quarter, nine months ended October 1, 2006 and post-acquisition 2005 periods 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 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) The calculation of EBITDA by segment and a reconciliation of consolidated EBIDTA to net income or loss follow:
</FN>
Third Quarter Ended Nine Months Ended
------------------- -----------------
2005 2006 2005 2006
---- ---- ---- ----
(In thousands)
Operating profit (loss):
Restaurants................................................$ 5,233 $ 25,728 $ 39,239 $ 71,529
Asset management .......................................... 1,487 2,062 4,438 4,335
General corporate.......................................... (17,880) (15,332) (51,672) (51,094)
--------- --------- ---------- --------
Consolidated operating profit (loss)...................... (11,160) 12,458 (7,995) 24,770
--------- --------- ---------- --------
Plus: depreciation and amortization, excluding amortization
of deferred financing costs:
Restaurants................................................ 7,686 13,508 13,175 36,572
Asset management........................................... 1,089 1,698 3,706 4,629
General corporate.......................................... 1,268 1,093 4,229 3,230
--------- --------- ---------- --------
Consolidated depreciation and amortization, excluding
amortization of deferred financing costs................ 10,043 16,299 21,110 44,431
--------- --------- ---------- --------
EBITDA:
Restaurants................................................ 12,919 39,236 52,414 108,101
Asset management........................................... 2,576 3,760 8,144 8,964
General corporate.......................................... (16,612) (14,239) (47,443) (47,864)
--------- --------- ---------- --------
Consolidated EBITDA....................................... (1,117) 28,757 13,115 69,201
Depreciation and amortization, excluding amortization
of deferred financing costs................................ (10,043) (16,299) (21,110) (44,431)
Interest expense.............................................. (22,081) (34,426) (44,818) (100,048)
Insurance expense related to long-term debt................... (531) -- (2,294) --
Loss on early extinguishment of debt.......................... (35,790) (194) (35,790) (13,671)
Investment income, net........................................ 13,600 23,021 30,276 74,767
Gain on sale of unconsolidated businesses..................... 325 3 12,989 2,259
Other income, net............................................. 1,025 318 2,138 5,754
--------- --------- ---------- --------
Income (loss) from continuing operations before income
taxes and minority interests............................ (54,612) 1,180 (45,494) (6,169)
Benefit from income taxes..................................... 14,657 344 11,647 3,578
Minority interests in income of consolidated subsidiaries..... (2,525) (976) (6,006) (6,674)
--------- --------- ---------- --------
Income (loss) from continuing operations.................. (42,480) 548 (39,853) (9,265)
Gain on disposal of discontinued operations................... -- -- 471 --
--------- --------- ---------- --------
Net income (loss).........................................$ (42,480) $ 548 $ (39,382) $ (9,265)
========= ========= ========== ========
<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 nine months ended
October 1, 2006 and the third quarter and nine months ended October 2, 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 adjustments and compensation expense related to equity
interests granted in our asset management segment holding company to those
measures after such items for the 2006 third quarter and nine months ended
October 1, 2006, and 2005 third quarter and nine months ended October 2,
2005 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 October 1, 2006:
Before adjustments for purchase accounting and
compensation expense related to equity interests
granted in asset management segment holding
company (2) ................................... $17,740 $ 3,934 $ 442 $ 4,376
Expected asset management fees recorded as a
receivable in purchase accounting.............. 26 26 -- 26
Amortization of intangible assets recorded in
purchase accounting............................ -- (1,256) 1,256 --
Compensation expense related to equity interests
granted in asset management segment holding
company (3).................................... -- (642) -- (642)
------- --------- -------- --------
After adjustments for purchase accounting and
compensation expense related to equity interests
granted in asset management segment holding
company........................................$ 17,766 $ 2,062 $ 1,698 $ 3,760
======== ========= ======== ========
For the nine months ended October 1, 2006:
Before adjustments for purchase accounting and
compensation expense related to equity interests
granted in asset management segment holding
company (2) ................................... $48,313 $ 9,777 $ 1,330 $ 11,107
Expected asset management fees recorded as a
receivable in purchase accounting.............. 77 77 -- 77
Amortization of intangible assets recorded in
purchase accounting............................ -- (3,299) 3,299 --
Compensation expense related to equity interests
granted in asset management segment holding
company (3).................................... -- (2,220) -- (2,220)
------- --------- -------- --------
After adjustments for purchase accounting and
compensation expense related to equity interests
granted in asset management segment holding
company........................................$ 48,390 $ 4,335 $ 4,629 $ 8,964
======== ========= ======== ========
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 October 2, 2005:
Before purchase accounting adjustments (2) ........ $13,171 $ 2,578 $ 96 $ 2,674
Expected asset management fees recorded as a
receivable in purchase accounting.............. 26 26 -- 26
Write-off of pre-acquisition receivable........... - (124) -- (124)
Amortization of intangible assets recorded in
purchase accounting............................ -- (993) 993 --
-------- --------- -------- --------
After purchase accounting adjustments..............$ 13,197 $ 1,487 $ 1,089 $ 2,576
======== ========= ======== ========
For the nine months ended October 2, 2005:
Before purchase accounting adjustments (2) ........ $38,554 $ 8,487 $ 277 $ 8,764
Expected asset management fees recorded as a
receivable in purchase accounting.............. (642) (642) -- (642)
Cost of services recorded as a liability
in purchase accounting (4)..................... -- 146 -- 146
Write-off of pre-acquisition receivable........... - (124) -- (124)
Amortization of intangible assets recorded in
purchase accounting............................ -- (3,429) 3,429 --
-------- --------- -------- --------
After purchase accounting adjustments..............$ 37,912 $ 4,438 $ 3,706 $ 8,144
======== ========= ======== ========
<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 third quarter, $1.4 million for the nine months ended
October 1, 2006, $0.4 million for the 2005 third quarter and $1.2
million for the nine months ended October 2, 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 our
subsidiary that holds our 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>