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 2006 RESULTS
New York, NY, March 1, 2007 - Triarc Companies, Inc. (NYSE: TRY; TRY.B)
announced today the results of operations for its fiscal year and fourth quarter
ended December 31, 2006.
Consolidated Highlights
o Consolidated revenues increased to $1,243.3 million in the 2006 fiscal year
($332.0 million in the 2006 fourth quarter) from $727.3 million in the 2005
fiscal year ($305.6 million in the 2005 fourth quarter), primarily
reflecting the full-period effect of 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 net additional stores and
continued positive systemwide same-store sales, which were up 3% in the 2006
fiscal year (1% in the 2006 fourth quarter).
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 $88.0 million in the 2006 fiscal year
($39.6 million in the 2006 fourth quarter) from $65.3 million in the 2005
fiscal year ($27.4 million in the 2005 fourth quarter). This increase
principally reflects asset management and incentive 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 $16.3 million of
royalties and franchise fees paid by RTM to Arby's, LLC included in
consolidated revenues for the 2005 periods prior to the acquisition date but
eliminated in consolidation for the 2006 periods. Aside from the effect of
the RTM acquisition, royalties and franchise and related fees increased $7.1
million principally due to same store sales increases of 5% and royalties
from the 94 stores opened in 2006.
o Consolidated operating profit (loss) increased to profit of $44.0 million in
the 2006 fiscal year ($18.7 million in the 2006 fourth quarter), compared
with a loss of $(32.1) million in the 2005 fiscal year ($(24.1) million in
the 2005 fourth quarter). These changes primarily reflect the effects of the
revenue improvements discussed above as well as a decrease in the loss on
the 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. Partially offsetting
these factors were the effects of higher costs of sales and higher general
and administrative expenses, which included RTM integration costs and
share-based compensation costs.
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 $110.2 million in the 2006 fiscal year ($40.6 million in the 2006 fourth
quarter), compared with $4.6 million in the 2005 fiscal year (loss of $(8.5)
million in the 2005 fourth quarter), primarily reflecting the positive
effects of the RTM acquisition and a decrease in the loss on the settlements
of unfavorable franchise rights. The attached table provides the calculation
of EBITDA and a reconciliation of EBITDA to our consolidated net income
(loss).
o Consolidated net loss was $(11.3) million, or $(0.13) per diluted Class A
and Class B share in the 2006 fiscal year (net loss of $(2.1) million in the
2006 fourth quarter or $(0.02) per diluted Class A and Class B share),
compared with $(55.6) million, or $(0.79) per diluted Class A and Class B
share in the 2005 fiscal year (net loss of $(16.2) million, or $(0.21) per
diluted Class A and Class B share in the 2005 fourth quarter) reflecting the
increase in operating profit discussed above and in investment income, as
discussed below, offset by an increase in interest expense also as discussed
below.
o Share-based compensation expense was $15.9 million in the 2006 fiscal year
($5.1 million in the 2006 fourth quarter) compared with $30.2 million in the
2005 fiscal year ($24.7 million in the 2005 fourth quarter). The 2006
amounts reflect our adoption of Statement of Financial Accounting Standards
No.123(R) at the beginning of fiscal 2006. The 2005 amounts reflect a $16.4
million provision for the intrinsic value of 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.
o Consolidated depreciation and amortization was $66.2 million in the 2006
fiscal year ($21.9 million in the 2006 fourth quarter) versus $36.7 million
in the 2005 fiscal year ($15.6 million in the 2005 fourth quarter). This
increase principally reflects the additional depreciation and amortization
related to the restaurants acquired in the RTM acquisition and a $3.7
million increase in the 2006 fiscal year ($1.9 million in the 2006 fourth
quarter) of asset impairment charges related to underperforming restaurants
and early termination of certain asset management contracts for
collateralized debt obligations ("CDOs").
o In the 2006 fiscal year, we recognized facilities relocation and corporate
restructuring charges of $3.3 million (reversal of $(0.5) million in the
2006 fourth quarter) compared with $13.5 million in the 2005 fiscal year
($6.9 million in the 2005 fourth quarter). The 2005 charges related
primarily to the combination of our restaurant operations with those of RTM
following the RTM acquisition. The 2006 charges principally related to our
decision not to move our corporate offices to a leased facility in Rye
Brook, New York.
o In the 2006 fiscal year, we recognized a loss on the settlement of
unfavorable franchise rights of $0.9 million ($0.2 million in the 2006
fourth quarter) compared with $17.2 million in the 2005 fiscal year ($0.2
million in the 2005 fourth quarter). These charges were 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 sellers such as 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
in 2005 and other restaurant acquisitions in 2006.
o Consolidated interest expense was $114.1 million in the 2006 fiscal year
($14.0 million in the 2006 fourth quarter), compared with $68.8 million in
the 2005 fiscal year ($24.0 million in the 2005 fourth quarter). The 2006
fiscal year increases principally reflect an increase of $33.6 million
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, an $11.2 million increase due to higher average debt
balances of the restaurant business following a refinancing in connection
with the RTM acquisition and the $8.8 million full year effect of an
increase in other debt due to the obligations assumed in the RTM acquisition
and obligations entered into subsequently for new restaurants and expiring
leases, 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. The decrease in interest expense in the 2006 fourth
quarter compared with the 2005 fourth quarter was principally due to this
effective redemption.
o The losses on early extinguishments of debt in the 2006 fiscal year and
fourth quarter totaled $14.1 million and $0.4 million, respectively. The
loss on early extinguishments of debt in fiscal 2006 principally related to
the effective conversion of $172.9 million principal amount of the
Convertible Notes and included $9.0 million of negotiated inducement
premiums and the write-off of $4.0 million of deferred financing costs. The
loss in the 2005 fiscal year totaled $35.8 million due to the July 2005 debt
refinancing in connection with the RTM acquisition. The loss for the 2005
fiscal year 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 results include a gain on sale of unconsolidated businesses of $4.0
million ($1.7 million in the 2006 fourth quarter) compared with a gain of
$13.1 million in fiscal year 2005 ($0.1 million in the 2005 fourth quarter),
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 December 31, 2006.
o Consolidated net investment income increased to $80.2 million in the 2006
fiscal year ($5.4 million in the 2006 fourth quarter), compared with $55.3
million in the 2005 fiscal year ($25.1 million in the 2005 fourth quarter).
The increase for the fiscal year periods 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 $34.2 million for the fiscal year was substantially
offset by the increase in interest expense related to the Opportunities Fund
noted above. The decrease in investment income related to the Opportunities
Fund for the 2006 fourth quarter of $9.9 million reflected the effective
redemption discussed above and was more than offset by the decrease 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 3% in the 2006 fiscal year (1% in the
2006 fourth quarter) versus an increase of 2% in the 2005 fiscal year (5% in
the 2005 fourth quarter) due to various marketing and new product
initiatives described below, the impact of value oriented promotions, new
menu offerings and selective price increases implemented in November 2006.
o Net sales from company-owned Arby's restaurants were $1,073.3 million in the
2006 fiscal year ($271.4 million in the 2006 fourth quarter), compared with
$570.8 million in the 2005 fiscal year ($258.5 million in the 2005 fourth
quarter).
o The increase in sales from company-owned restaurants in the 2006 fiscal year
of $502.5 million reflects the effect of the acquisition of RTM as well as
the addition of 22 net company-owned restaurants in 2006. Sales from
company-owned restaurants increased $12.9 million in the 2006 fourth quarter
reflecting the additional restaurants. Same-store sales for company-owned
restaurants increased 1% in both the 2006 fiscal year and the 2006 fourth
quarter as compared with the same periods in 2005. The increases primarily
reflect the effect of value oriented promotions and new menu offerings, an
enhanced menu board design and the March 2006 launch of Arby's Chicken
Naturals(R), a line of menu offerings made with 100 percent all natural
chicken breast partially offset by the continued underperformance of
company-owned stores in the economically-weaker Michigan and Ohio regions.
o 2006 fiscal year same-store sales for franchised restaurants increased 5%
(1% in the 2006 fourth quarter), compared with the same periods in 2005. The
2006 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.
o Royalties and franchise and related fees decreased to $82.0 million in the
2006 fiscal year ($21.0 million in the 2006 fourth quarter), compared with
$91.2 million in the 2005 fiscal year ($19.6 million in the 2005 fourth
quarter). The decline in the 2006 fiscal year 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 in both
of the 2006 and 2005 fiscal years and in the 2005 fourth quarter (28% for
the 2006 fourth quarter), and was positively affected by (1) higher gross
margins at the restaurants acquired in the RTM acquisition for the full year
in 2006, (2) continuing implementation of the more effective operational
procedures of the RTM restaurants at the restaurants owned prior to the RTM
acquisition, (3) increased beverage rebates resulting from an agreement for
Pepsi beverage products effective January 1, 2006 and (4) decreases in beef
costs. These positive effects were substantially offset by the effect of
increased price discounting principally in the second half of 2006
associated with our value-oriented menu offerings.
o Our restaurant business operating profit increased to $95.3 million in the
2006 fiscal year ($23.3 million in the 2006 fourth quarter) versus $52.9
million in the 2005 fiscal year ($13.6 million in the 2005 fourth quarter)
principally reflecting the positive effects of the RTM acquisition and the
prior period loss on the settlement of unfavorable franchise rights. In
addition, the fiscal 2006 year results reflect an increase of $7.6 million
in costs related to outside consultants that were used to assist in the
integration of RTM as well as a $5.6 million increase in severance and
related charges principally in connection with the replacement of several
senior restaurant executives.
o Depreciation and amortization for our restaurant operations was $54.6
million in the 2006 fiscal year ($18.1 million in the 2006 fourth quarter)
versus $26.4 million in the 2005 fiscal year ($13.3 million in the 2005
fourth quarter). These increases principally reflect the additional
depreciation and amortization related to the restaurants acquired in the RTM
acquisition and an increase of $2.6 million ($0.7 million for the 2006
fourth quarter) in impairment charges principally related to underperforming
restaurants.
o Restaurant business EBITDA was $149.9 million in the 2006 fiscal year ($41.4
million in the 2006 fourth quarter), compared with $79.3 million in the 2005
fiscal year ($26.9 million in the 2005 fourth quarter) primarily reflecting
the positive effects of the RTM acquisition and the prior period loss on the
settlement of unfavorable franchise rights. 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 fiscal year, the Arby's system opened 131 new units (38 in the
2006 fourth quarter) and closed 52 (12 in the 2006 fourth quarter) generally
underperforming units. We plan to open 50 new company-owned units in 2007.
As of December 31, 2006, Arby's had commitments from franchisees to build
295 new units through 2012.
Asset Management Highlights
o Triarc accounts for Deerfield, its asset management business, as a
consolidated subsidiary with a minority interest. 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, for the 2006 fiscal
year, Deerfield's reported asset management and related fees, operating
profit, depreciation and amortization and EBITDA were $88.0 million, $15.8
million, $7.3 million, $23.1 million, respectively. For the 2005 fiscal
year, those amounts were $65.3 million, $6.6 million, $4.8 million and $11.5
million, respectively. For the 2006 fourth quarter, those amounts were $39.6
million, $11.5 million, $2.7 million and $14.2 million, respectively,
compared with $27.4 million, $2.2 million, $1.1 million and $3.3 million,
respectively, in the fourth quarter of 2005. 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 fiscal year, 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 $88.0 million,
$24.2 million, $1.8 million and $26.0 million, respectively. For the 2005
fiscal year, those amounts were $66.4 million, $17.0 million, $0.4 million
and $17.4 million, respectively. For the 2006 fourth quarter, those amounts
were $39.7 million, $14.4 million, $0.5 million and $14.9 million,
respectively, compared with $27.9 million, $8.5 million, $0.1 million and
$8.6 million, respectively, in the fourth quarter 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 January 1, 2007, Deerfield had approximately $13.2 billion of assets
under management ("AUM"), of which approximately $13.5 million was
attributable to investments by Triarc. Deerfield's AUM at January 1, 2007
included approximately $11.2 billion in 24 CDOs and a structured loan fund,
approximately $859.0 million in four hedge funds and approximately $331.6
million in six managed accounts.
o Deerfield Triarc Capital Corp. ("Deerfield Triarc," NYSE: DFR) is a publicly
traded REIT managed by Deerfield that invests in real estate-related
securities and various other asset classes. Triarc and its subsidiaries
beneficially own approximately 2.8% of Deerfield Triarc's common stock.
Commenting on Triarc's asset management operations, Nelson Peltz, Triarc's
Chairman and Chief Executive Officer, said: "We believe that Deerfield is an
outstanding asset management franchise with strong performance and leading
positions in key market segments. In 2007, Deerfield will continue to focus on
expanding its platform and assets under management."
Commenting on Arby's, Peter May, Triarc's President and Chief Operating
Officer, said: "With its new and seasoned executive team and franchisees that
are highly aligned with the franchisor, Arby's is well positioned for continued
growth and further improvement in operation efficiencies and overall
profitability. 2006 was certainly a pivotal and successful year for Arby's and
the prospects for 2007 look even brighter."
Commenting on Triarc's corporate restructuring, Peltz said: "2006 was an
important year for Triarc, marked by continued growth and opportunity at both
Arby's and Deerfield, our two successful, financially strong and independently
managed businesses. At Arby's, we welcomed back Roland C. Smith as the new Chief
Executive Officer and continued to expand our strong presence in the fast food
industry. At Deerfield, assets under management grew to over $13 billion by year
end, as we worked with Gregory H. Sachs and his team to expand their unique
alternative assets platform. We are proud of what we have accomplished at both
businesses as we continue to explore a corporate restructuring to unlock the
significant value of both Arby's and Deerfield."
Triarc is a holding company and, through its subsidiaries, is currently the
franchisor of the Arby's restaurant system and the owner of approximately 94% of
the voting interests, 64% of the capital interests and at least 52% of the
profits interests in Deerfield & Company LLC (Deerfield), an asset management
firm. The Arby's restaurant system is comprised of approximately 3,600
restaurants, of which, as of December 31, 2006, 1,061 were owned and operated by
our subsidiaries. Deerfield, through its wholly-owned subsidiary Deerfield
Capital Management LLC, is a Chicago-based asset manager offering a diverse
range of fixed income and credit-related strategies to institutional investors
with approximately $13.2 billion under management as of December 31, 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. There can be no assurance that we will build 50 new company-owned units
during 2007 or that our franchisees will honor their commitments to build
295 new restaurants through 2012.
7. There can be no assurance that our 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.
8. Certain 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. The forward-looking statements
contained in this press release 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
all of our forward-looking 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 or implied by the
forward-looking statements contained herein. Such factors, all of which are
difficult or impossible to predict accurately and many of which are beyond
our control, 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, including real estate and construction costs;
o advertising and promotional efforts by us and our competitors;
o consumer awareness of the Arby's brand;
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, such as the extent to
which consumers eat meals away from home;
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 strategies and operating initiatives;
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,
and our and our franchisees' ability to retain such personnel;
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 and chicken), 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, loss of investor confidence
due to adverse publicity, and non-renewal or early termination of investment
management agreements;
o increased competition from other asset managers offering products similar 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 effective
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 December 31,
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 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 1, 2006 and December 31, 2006(a)
Fourth Quarter Fiscal Year
-------------- -----------
2005 2006 2005 2006
---- ---- ---- ----
(In thousands except per share amounts)
Revenues:
Net sales............................................$ 258,528 $ 271,381 $ 570,846 $1,073,271
Royalties and franchise and related fees............. 19,617 20,976 91,163 82,001
Asset management and related fees.................... 27,413 39,616 65,325 88,006
--------- --------- --------- ----------
305,558 331,973 727,334 1,243,278
--------- --------- --------- ----------
Costs and expenses:
Cost of sales, excluding depreciation and
amortization....................................... 189,586 194,609 417,975 778,592
Cost of services, excluding depreciation and
amortization....................................... 11,443 16,534 24,816 35,277
Advertising and promotions........................... 19,312 18,848 43,472 78,619
General and administrative, excluding depreciation
and amortization................................... 86,641 61,594 205,797 236,396
Depreciation and amortization, excluding
amortization of deferred financing costs........... 15,560 21,913 36,670 66,227
Facilities relocation and corporate restructuring
charges (reversal)................................. 6,949 (469) 13,508 3,273
Loss on settlements of unfavorable franchise rights.. 146 229 17,170 887
--------- --------- --------- ----------
329,637 313,258 759,408 1,199,271
--------- --------- --------- ----------
Operating profit (loss).......................... (24,079) 18,715 (32,074) 44,007
Interest expense....................................... (23,971) (14,040) (68,789) (114,088)
Insurance expense related to long-term debt............ -- -- (2,294) --
Loss on early extinguishments of debt.................. (19) (411) (35,809) (14,082)
Investment income, net................................. 25,060 5,431 55,336 80,198
Gain on sale of unconsolidated businesses.............. 79 1,722 13,068 3,981
Other income (expense), net............................ 1,741 (1,056) 3,879 4,696
--------- --------- --------- ----------
Income (loss) from continuing operations before
income taxes and minority interests ........... (21,189) 10,361 (66,683) 4,712
(Provision for) benefit from income taxes.............. 4,886 (7,759) 16,533 (4,389)
Minority interests in income of consolidated subsidiaries (2,756) (4,849) (8,762) (11,523)
---------- ---------- ------------ -----------
Loss from continuing operations.................. (19,059) (2,247) (58,912) (11,200)
Income (loss) from discontinued operations............. 2,814 183 3,285 (129)
--------- --------- --------- ----------
Net loss.........................................$ (16,245) $ (2,064) $ (55,627) (11,329)
========= ========= ========= ==========
EBITDA (b).............................................$ (8,519) $ 40,628 $ 4,596 $ 110,234
========= ========= ========= ==========
Basic and diluted income (loss) per share of
Class A common stock and Class B common stock:
Continuing operations..............................$ (.25) $ (.02) (.84) $ (.13)
Discontinued operations............................ .04 -- .05 --
--------- -------- -------- ----------
Net income (loss)..................................$ (.21) $ (.02) $ (.79) $ (.13)
========= ========= ======== ==========
Shares used to calculate basic and diluted income
(loss) per share: (c)
Class A common stock............................... 23,822 27,942 23,766 27,301
========= ========= ========= =========
Class B common stock............................... 51,772 60,905 46,245 59,343
========= ========= ========= =========
<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 fourth quarter, the fiscal
year ended December 31, 2006 and the 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
EBITDA to net loss follow:
</FN>
Fourth Quarter Fiscal Year
-------------- -----------
2005 2006 2005 2006
---- ---- ---- ----
(In thousands)
Operating profit (loss):
Restaurants................................................$ 13,637 $ 23,295 $ 52,876 $ 95,345
Asset management .......................................... 2,199 11,498 6,637 15,833
General corporate.......................................... (39,915) (16,078) (91,587) (67,171)
--------- --------- ---------- --------
Consolidated operating profit (loss)...................... (24,079) 18,715 (32,074) 44,007
--------- --------- ---------- --------
Plus: depreciation and amortization, excluding amortization
of deferred financing costs:
Restaurants................................................ 13,273 18,112 26,448 54,567
Asset management........................................... 1,129 2,689 4,835 7,317
General corporate.......................................... 1,158 1,112 5,387 4,343
--------- --------- ---------- --------
Consolidated depreciation and amortization, excluding
amortization of deferred financing costs................ 15,560 21,913 36,670 66,227
--------- --------- ---------- --------
EBITDA:
Restaurants................................................ 26,910 41,407 79,324 149,912
Asset management........................................... 3,328 14,187 11,472 23,150
General corporate.......................................... (38,757) (14,966) (86,200) (62,828)
--------- --------- ---------- --------
Consolidated EBITDA....................................... (8,519) 40,628 4,596 110,234
Depreciation and amortization, excluding amortization
of deferred financing costs................................ (15,560) (21,913) (36,670) (66,227)
Interest expense.............................................. (23,971) (14,040) (68,789) (114,088)
Insurance expense related to long-term debt................... -- -- (2,294) --
Loss on early extinguishments of debt......................... (19) (411) (35,809) (14,082)
Investment income, net........................................ 25,060 5,431 55,336 80,198
Gain on sale of unconsolidated businesses..................... 79 1,722 13,068 3,981
Other income (expense), net................................... 1,741 (1,056) 3,879 4,696
--------- --------- ---------- --------
Income (loss) from continuing operations before income
taxes and minority interests............................ (21,189) 10,361 (66,683) 4,712
(Provision for) benefit from income taxes..................... 4,886 (7,759) 16,533 (4,389)
Minority interests in income of consolidated subsidiaries..... (2,756) (4,849) (8,762) (11,523)
--------- --------- ---------- --------
Loss from continuing operations........................... (19,059) (2,247) (58,912) (11,200)
Income (loss) from discontinued operations.................... 2,814 183 3,285 (129)
--------- --------- ---------- --------
Net loss..................................................$ (16,245) $ (2,064) $ (55,627) $(11,329)
========= ========= ========== ========
<FN>
(c) The shares used to calculate diluted loss per share are the same as those
used to calculate basic loss per share for all periods presented 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 fourth quarter and fiscal year ended
December 31, 2006, and 2005 fourth quarter and fiscal year ended January 1,
2006 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 December 31, 2006:
Before adjustments for purchase accounting and
compensation expense related to equity interests
granted in asset management segment holding
company (2) ................................... $39,691 $ 14,370 $ 510 $ 14,880
Expected asset management fees recorded as a
receivable in purchase accounting.............. (75) (75) -- (75)
Amortization of intangible assets recorded in
purchase accounting............................ -- (2,179) 2,179 --
Compensation expense related to equity interest
granted in asset management segment holding
company (3).................................... -- (618) -- (618)
------- --------- -------- --------
After adjustments for purchase accounting and
compensation expense related to equity interests
granted in asset management segment holding
company........................................$ 39,616 $ 11,498 $ 2,689 $ 14,187
======== ========= ======== ========
For the fiscal year ended December 31, 2006:
Before adjustments for purchase accounting and
compensation expense related to equity interests
granted in asset management segment holding
company (2) ................................... $88,004 $ 24,147 $ 1,839 $ 25,986
Expected asset management fees recorded as a
receivable in purchase accounting.............. 2 2 -- 2
Amortization of intangible assets recorded in
purchase accounting............................ -- (5,478) 5,478 --
Compensation expense related to equity interests
granted in asset management segment holding
company (3).................................... -- (2,838) -- (2,838)
------- --------- -------- --------
After adjustments for purchase accounting and
compensation expense related to equity interests
granted in asset management segment holding
company........................................$ 88,006 $ 15,833 $ 7,317 $ 23,150
======== ========= ======== ========
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
======== ========= ======== ========
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
======== ========= ======== ========
<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 $1.1 million for the 2006 fourth
quarter, $2.4 million for the fiscal year ended December 31, 2006, $1.6
million for the 2005 fourth quarter and $2.9 million for the fiscal year
ended January 1, 2006.
(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>