EXHIBIT 99.1
Triarc Companies, Inc.
280 Park Avenue
New York, NY 10017
For Immediate Release
CONTACT: Anne A. Tarbell
(212) 451-3030
www.triarc.com
TRIARC REPORTS FIRST QUARTER 2007 RESULTS
New York, NY, May 11, 2007 - Triarc Companies, Inc. (NYSE: TRY; TRY.B) announced
today the results of operations for its first quarter ended April 1, 2007.
Consolidated Highlights
o Consolidated revenues increased to $302.0 million in the 2007 first
quarter from $292.0 million in the 2006 first quarter, primarily
reflecting the impact of net additional Arby's(R) restaurants with
generally higher average unit volumes and higher restaurant royalties and
franchise fees. Partially offsetting these factors were a decline in
systemwide same-store sales, which were down 1% in the 2007 first quarter
(up 4% in the 2006 first quarter), due to poor weather conditions and
continued underperformance of company-owned stores in the
economically-weaker Michigan and Ohio regions.
o Consolidated revenues were also positively impacted by increases in the
asset management and related fees of Deerfield & Company LLC ("Deerfield")
as Deerfield's revenues increased to $15.9 million in the 2007 first
quarter from $14.8 million in the 2006 first quarter.
o Consolidated operating profit (loss) increased to profit of $8.5 million
in the 2007 first quarter, compared with a loss of $(0.3) million in the
2006 first quarter. These changes primarily reflect the effects of the
revenue improvements discussed above. Results were also impacted by higher
depreciation and amortization costs as discussed below, partially offset
by lower advertising and promotions expenses and general and
administrative expenses. The decrease in (1) general and administrative
expenses reflected lower incentive compensation accruals and (2)
advertising and promotions expenses was due to the timing of advertising
campaigns compared with the prior year period.
o Consolidated "EBITDA" (which we define as operating profit plus
depreciation and amortization, other than amortization of deferred
financing costs) increased to $24.5 million in the 2007 first quarter,
compared with $13.1 million in the 2006 first quarter reflecting the
factors discussed above. The attached table provides the calculation of
consolidated EBITDA and a reconciliation of consolidated EBITDA to our
consolidated net income (loss).
o Consolidated net income was $7.1 million, or $0.07 per diluted Class A and
$0.08 per diluted Class B, Series 1, share in the 2007 first quarter,
compared with a loss of $(12.8) million, or $(0.16) per Class A and Class
B share in the 2006 first quarter, principally reflecting the after-tax
effects of the increase in operating profit discussed above, the effect of
a prior period loss on early extinguishments of debt that did not recur in
the 2007 quarter, higher investment income and lower interest expense, all
as discussed below.
o Share-based compensation expense was $2.8 million in the 2007 first
quarter compared with $3.8 million in the 2006 first quarter. The decrease
reflects the effect of a portion of our share-based awards becoming fully
vested prior to the end of our 2007 first quarter.
o Consolidated depreciation and amortization was $16.0 million in the 2007
first quarter versus $13.4 million in the 2006 first quarter. This
increase principally reflects the additional depreciation and amortization
related to 44 net restaurants added since April 2, 2006 as well as losses
on disposals of properties.
o In the 2007 first quarter, we recognized $0.4 million facilities
relocation and corporate restructuring charges compared with $0.8 million
in the 2006 first quarter. The charges principally relate to our
integration of RTM, which was acquired in July 2005 and the relocation of
our Arby's corporate offices to Atlanta, GA.
o Consolidated interest expense decreased $12.0 million to $15.4 million in
the 2007 first quarter compared with $27.4 million in the 2006 first
quarter. The 2007 first quarter decrease principally reflects the
effective redemption, as of September 29, 2006, of our investment in the
Deerfield Opportunities Fund (the "Opportunities Fund"), a multi-strategy
hedge fund managed by Deerfield that we consolidated as a result of our
investment and which employed leverage in its investment strategies.
o The loss on early extinguishments of debt totaled $12.5 million in the
2006 first quarter. This loss was comprised of negotiated inducement
premiums and the write-off of unamortized deferred financing costs in
connection with the effective conversion of $165.8 million principal
amount of the Company's Convertible Notes.
o The gain on sale of unconsolidated business of $2.3 million in the 2006
first quarter related to our investment in Encore Capital Group, Inc.
(NASDAQ: ECPG), an equity investment of the Company. On May 10, 2007, the
Company sold a substantial portion of its remaining investment in Encore
for cash proceeds of $8.6 million. The sale will result in an approximate
$2.5 million gain on sale of unconsolidated business in the 2007 second
quarter.
o Consolidated net investment income increased to $23.1 million in the 2007
first quarter, compared with $21.0 million in the 2006 first quarter. The
increase for the first quarter primarily reflects an increase in
recognized net gains principally due to an increase in gains realized on
sale of available-for-sale securities, including a $12.8 million gain on
one such security, and a decrease in interest income reflecting the
effective redemption of our investment in the Opportunities Fund as of
September 29, 2006.
Restaurant Operations Highlights
o Systemwide same-store sales were down 1% in the 2007 first quarter versus
an increase of 4% in the 2006 first quarter primarily due to poor weather
conditions and continued underperformance of company-owned stores in the
economically-weaker Michigan and Ohio regions. These factors were
partially offset by incremental sales from limited time product offerings,
the effect of selective price increases and increased sales volume from
value oriented menu offerings. We currently anticipate positive sales
growth for the remainder of 2007 driven by a value oriented menu program
which offers a flexible combination of selected menu items, continued
limited time product offerings, the full period effect of selective price
increases and new product introductions.
o Net sales from company-owned Arby's restaurants were $266.5 million in the
2007 first quarter, compared with $258.8 million in the 2006 first
quarter. The increase reflects the addition of 44 net company-owned
restaurants since April 2, 2006. Same-store sales for company-owned
restaurants decreased 2% in the 2007 first quarter (2% increase in the
2006 first quarter). The decrease in the 2007 first quarter primarily
reflects the effects of poor weather and the continued underperformance of
company-owned stores in the economically-weaker Michigan and Ohio regions.
o 2007 first quarter year same-store sales for franchised restaurants
decreased 1% (5% increase in the 2006 first quarter). The decrease
reflects the impact of poor weather discussed above, which more than
offset the positive effects of local marketing initiatives, including
local television and advertising and increased couponing and selective
price increases.
o Royalties and franchise and related fees increased to $19.7 million in the
2007 first quarter, compared with $18.4 million in the 2006 first quarter,
due primarily to 95 openings of franchised restaurants since April 2,
2006, with generally higher average unit volumes, and the 7 restaurants
that we sold to franchisees since April 2, 2006 replacing the royalties
from 30 franchised restaurants closed and the elimination of royalties
from 17 restaurants that we acquired from franchisees since April 2, 2006.
o The gross margin for our company-owned restaurants increased to 27% of
sales in the 2007 first quarter, compared with 26% of sales in the 2006
first quarter, and was positively affected by (1) continuing
implementation of the more effective operational procedures of the former
RTM restaurants at the restaurants owned prior to the RTM acquisition, (2)
decreased beverage costs, (3) the effect of selective price increases, and
(4) decreases in beef costs. We anticipate that that our gross margin will
be relatively consistent with the 2007 first quarter for the remainder of
2007.
o Our restaurant business operating profit increased to $22.8 million in the
2007 first quarter versus $19.2 million in the 2006 first quarter
principally reflecting the positive effects of net additional stores with
generally higher average unit volumes and higher restaurant royalties and
franchise fees as well as the margin improvement, all discussed above.
o Depreciation and amortization for our restaurant operations was $13.6
million in the 2007 first quarter versus $10.8 million in the 2006 first
quarter. This increase principally reflects the additional depreciation
and amortization related to net restaurants added since April 2, 2006 as
well as losses on the disposal of properties.
o Restaurant business EBITDA was $36.4 million in the 2007 first quarter,
compared with $29.9 million in the 2006 first quarter primarily reflecting
the positive effects of the factors discussed above. 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 2007 first quarter, the Arby's system opened 32 new units and
closed 11 generally underperforming units. We plan to open 35 new
company-owned units during the remainder of 2007. As of April 1, 2007,
Arby's had commitments from franchisees to build 338 new units through
2013.
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 subsidiary, Triarc
Deerfield Holdings, LLC, which is the majority owner of Deerfield, and
before the effect of minority interests, for the 2007 first quarter,
Deerfield's reported asset management and related fees, operating profit,
depreciation and amortization and EBITDA were $15.9 million, $1.7 million,
$1.3 million and $2.9 million, respectively. For the 2006 first quarter,
those amounts were $14.8 million, $0.6 million, $1.5 million and $2.1
million, respectively. 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 first 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 $15.9 million, $2.8
million, $0.5 million and $3.3 million, respectively. For the 2006 first
quarter, those amounts were $14.8 million, $2.6 million, $0.5 million and
$3.1 million, respectively. The attached table provides a reconciliation
of these measures to the corresponding measures without exclusion of the
effects of purchase accounting adjustments associated with the Deerfield
acquisition and the grant of equity interests in Triarc Deerfield
Holdings, LLC.
o As of May 1, 2007, Deerfield had approximately $14.2 billion of assets
under management ("AUM"), of which approximately $15 million was
attributable to investments by Triarc. Deerfield's AUM at May 1, 2007
included approximately $12.2 billion in 28 CDOs and a structured loan
fund, approximately $937 million in four hedge funds, approximately $737
million in Deerfield Triarc Capital Corp. (which as discussed below is the
real estate investment trust that has executed a definitive agreement to
buy Deerfield), and an aggregate of approximately $331 million in several
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. As noted below, following the closing of the sale of
Deerfield to Deerfield Triarc, Triarc and its subsidiaries are expected to
own approximately 12% of Deerfield Triarc's common stock.
Corporate Restructuring
o As previously announced, as part of the corporate restructuring that would
separate Triarc's asset management business (Deerfield) from its
restaurant business (Arby's), a definitive agreement has been entered into
pursuant to which Deerfield Triarc will acquire Triarc's controlling
interest in Deerfield. The total consideration to be received by Triarc
and other members of Deerfield is approximately $300 million (based on the
average fair market value of DFR's common stock over the 10 trading day
period prior to the date of the definitive agreement), which is more than
two times Deerfield's enterprise value of approximately $145 million when
Triarc purchased its control stake in July 2004. The consideration to be
received by Triarc and the other sellers is subject to adjustment under
certain circumstances. Triarc expects to receive a minimum of
approximately $170 million in the aggregate in cash and DFR common stock
for its capital interest of approximately 64% and its profits interest of
at least 52% in Deerfield. As a result of the transaction, Triarc expects
to own approximately 12% of DFR's common stock. The transaction, which is
expected to close in the third quarter of 2007, is subject to customary
closing conditions.
o Following completion of the sale of Deerfield, Triarc's sole operating
business would be its Arby's restaurant business. As a result, Triarc
would then be a "pure play" publicly traded restaurant company led by
Roland Smith, Chief Executive Officer of Arby's Restaurant Group. Triarc
expects to change its name to reflect its new identity as a "pure play"
restaurant company. Triarc is also considering various financing
opportunities to further its goal of significantly increasing value
through the acquisition of other restaurant companies.
o As previously announced, Triarc has entered into contractual settlements
with Triarc's Chairman and Chief Executive Officer, Nelson Peltz, and
President and Chief Operating Officer, Peter W. May, pursuant to which
they will no longer serve as senior officers of Triarc after June 29,
2007. However, Peltz and May, who together beneficially own approximately
10.7 million shares of Class A Common Stock and 14.0 million shares of
Class B Common Stock, Series 1, constituting approximately 34.4% of the
Triarc's voting power, are expected to continue to be large shareholders
of Triarc. It is also anticipated that Peltz will continue as
non-executive Chairman of Triarc and May will be non-executive Vice
Chairman of Triarc.
Commenting on Triarc's asset management operations, Nelson Peltz, Triarc's
Chairman and Chief Executive Officer, said: "Upon completion of its sale, we
will have realized substantial value from our investment in Deerfield. In the
last several years, we have worked closely with Gregory Sachs and his team at
Deerfield to expand its unique alternative assets platform. We are proud of what
we have accomplished with the Deerfield team having more than doubled its
value."
Commenting on Arby's 2007 first quarter results, Peter May, Triarc's
President and Chief Operating Officer, said: "We are pleased with the strength
of the margins at our company-owned stores. In addition, Roland Smith and his
team have worked hard to align the interests of Arby's and its franchisees.
Accordingly, we believe that Arby's is well positioned for continued growth and
further improvement in operating efficiencies and overall profitability."
May added: "We expect 2007 to be a pivotal and successful year for Arby's
as it transforms into a `pure play' publicly traded restaurant company, which we
believe will be able to significantly increase shareholder value through both
organic growth and the acquisition of other restaurant companies."
Triarc is a holding company and, through its subsidiaries, is 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 April 1, 2007, 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 $14.2 billion under management as of May 1, 2007.
# # #
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 one restaurant managed pursuant to
a management agreement.
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 open 35 new company-owned units
during the remainder of 2007 or that our franchisees will honor their
commitments to build 338 new restaurants through 2013.
7. There can be no assurance that the sale of Deerfield will be completed,
nor can there be any assurance that if the sale is completed that
Deerfield will be successfully integrated with Deerfield Triarc's existing
operations. The sale of Deerfield is subject to customary closing
conditions, including, without limitation, the receipt by Deerfield Triarc
of financing for the cash portion of the purchase price and related
transaction costs, receipt of certain third party consents, a registration
statement for the Deerfield Triarc shares to be received by Triarc being
declared effective by the Securities and Exchange Commission and other
conditions set forth in the definitive agreement, including the expiration
or termination of the applicable waiting periods under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976. Deerfield has the
right to terminate the definitive agreement if Deerfield Triarc does not
deliver by May 19, 2007 financing commitments for the transaction in form
and substance reasonably satisfactory to Deerfield. In addition, the
transaction is subject to approval by Deerfield Triarc stockholders
representing (1) a majority of the votes cast at a meeting to approve the
transaction and (2) a majority of the votes cast by stockholders not
affiliated with Deerfield. A stockholders' vote on the proposed
transaction is expected to be held during the 2007 third quarter. When the
transaction closes, Deerfield Triarc will discontinue the use of "Triarc"
in its name.
8. There can be no assurance that our corporate restructuring will be
completed or the terms or timing of such completed restructuring. There
can be no assurance that Triarc's New York-based corporate operations and
headquarters will be successfully integrated with ARG's existing
Atlanta-based operations. In addition, there can be no assurance that any
acquisitions of other restaurant companies will occur or that if any such
acquisition occurs it will be successfully integrated with the Company's
existing restaurant operations.
9. 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.
10. The statements in this press release concerning Deerfield Triarc Capital
Corp. ("DFR") that are not historical facts, including, most importantly,
information concerning possible or assumed future results of operations of
DFR 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 related 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 relating to DFR are based on DFR's
current expectations, speak only as of the date of this press release and
are susceptible to a number of risks, uncertainties and other factors.
DFR's 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 DFR's future results
and could cause those results to differ materially from those expressed in
the forward-looking statements contained herein. Such factors include
higher than expected prepayment rates on the mortgages underlying DFR's
mortgage securities holdings; DFR's inability to obtain favorable interest
rates or margin terms on the financing that DFR may need to leverage its
mortgage securities and other positions; increased rates of default on
DFR's loan portfolio (which risk rises as the portfolio seasons), and
decreased recovery rates on defaulted loans; flattening or inversion of
the yield curve (short term rates increasing at greater rate than longer
term rates), reducing DFR's net interest income on its financed mortgage
securities positions; DFR's inability adequately to hedge DFR's holdings
sensitive to changes in interest rates; narrowing of credit spreads, thus
decreasing DFR's net interest income on future credit investments (such as
bank loans); changes in REIT qualification requirements, making it
difficult for DFR to conduct its investment strategy; lack of availability
of qualifying real estate-related investments; a loss of key portfolio
management personnel; DFR's inability to continue to issue collateralized
debt obligation vehicles (which can provide DFR with attractive financing
for its debt securities investments); adverse changes in accounting
principles, tax law, or legal/regulatory requirements; competition with
other REITs for investments with limited supply; changes in the general
economy or the debt markets in which DFR invests; and other risks and
uncertainties disclosed from time to time in DFR's filings with the
Securities and Exchange Commission, all of which are difficult or
impossible to predict accurately and all of which are beyond our control.
11. 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
Quarters Ended April 2, 2006 and April 1, 2007
First Quarter Ended
2006 2007
---- ----
(In thousands except per share amounts)
(Unaudited)
Revenues:
Net sales..............................................................$ 258,842 $ 266,498
Royalties and franchise and related fees............................... 18,388 19,670
Asset management and related fees...................................... 14,796 15,878
--------- ---------
292,026 302,046
--------- ---------
Costs and expenses:
Cost of sales, excluding depreciation and amortization................. 192,384 194,972
Cost of services, excluding depreciation and amortization.............. 5,520 6,890
Advertising and promotions............................................. 20,068 17,729
General and administrative, excluding depreciation
and amortization..................................................... 60,150 57,583
Depreciation and amortization, excluding
amortization of deferred financing costs............................. 13,361 15,985
Facilities relocation and corporate restructuring...................... 803 403
--------- ---------
292,286 293,562
--------- ---------
Operating profit (loss)............................................ (260) 8,484
Interest expense......................................................... (27,376) (15,389)
Loss on early extinguishments of debt.................................... (12,544) --
Investment income, net................................................... 20,950 23,148
Gain (loss) on sale of unconsolidated business........................... 2,256 (3)
Other income, net........................................................ 1,737 1,610
--------- ---------
Income (loss) from continuing operations before
income taxes and minority interests.............................. (15,237) 17,850
Benefit from (provision for) income taxes................................ 5,637 (7,443)
Minority interests in income of consolidated subsidiaries................ (3,090) (3,197)
--------- ---------
Income (loss) from continuing operations........................... (12,690) 7,210
Loss from discontinued operations........................................ (76) (149)
--------- ---------
Net income (loss)..................................................$ (12,766) $ 7,061
========= =========
EBITDA (a)...............................................................$ 13,101 $ 24,469
========= =========
Basic and diluted income (loss) from continuing operations and
net income (loss) per share:
Class A common stock.................................................$ (.16) $ .07
======== ========
Class B common stock................................................. (.16) .08
======== ========
Shares used to calculate basic income (loss) per share:
Class A common stock................................................. 25,968 (b) 28,760
========= =========
Class B common stock................................................. 56,344 (b) 63,288
========= =========
Shares used to calculate diluted income (loss) per share:
Class A common stock................................................. 25,968 (b) 29,034
========= =========
Class B common stock................................................. 56,344 (b) 64,820
========= =========
(a) The calculation of EBITDA by segment and a reconciliation of consolidated
EBITDA to net loss follow:
First Quarter Ended
2006 2007
---- ----
(In thousands)
Operating profit (loss):
Restaurants................................................................$ 19,154 $ 22,767
Asset management........................................................... 625 1,681
General corporate.......................................................... (20,039) (15,964)
--------- ----------
Consolidated operating profit (loss)...................................... (260) 8,484
--------- ----------
Plus: depreciation and amortization, excluding amortization
of deferred financing costs:
Restaurants................................................................ 10,793 13,635
Asset management........................................................... 1,483 1,251
General corporate.......................................................... 1,085 1,099
--------- ----------
Consolidated depreciation and amortization, excluding
amortization of deferred financing costs................................ 13,361 15,985
--------- ----------
EBITDA:
Restaurants................................................................ 29,947 36,402
Asset management........................................................... 2,108 2,932
General corporate.......................................................... (18,954) (14,865)
--------- ----------
Consolidated EBITDA....................................................... 13,101 24,469
Depreciation and amortization, excluding amortization
of deferred financing costs................................................ (13,361) (15,985)
Interest expense.............................................................. (27,376) (15,389)
Loss on early extinguishment of debt.......................................... (12,544) --
Investment income, net........................................................ 20,950 23,148
Gain (loss) on sale of unconsolidated business................................ 2,256 (3)
Other income, net............................................................. 1,737 1,610
--------- ----------
Income (loss) from continuing operations before income
taxes and minority interests............................................ (15,237) 17,850
Benefit from (provision for) income taxes..................................... 5,637 (7,443)
Minority interests in income of consolidated subsidiaries..................... (3,090) (3,197)
--------- ----------
Income (loss) from continuing operations.................................. (12,690) 7,210
Loss from discontinued operations............................................. (76) (149)
--------- ----------
Net income (loss).........................................................$ (12,766) $ 7,061
========= ==========
<FN>
(b) The shares used to calculate diluted loss per share are the same as those
used to calculate basic loss per share for the first quarter of 2006 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.
</FN>
(c) 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 first quarter and the 2007 first
quarter follows:
Depreciation and
Amortization,
Excluding
Asset Amortization
Management of Deferred
and Related Operating Financing
Fees(1) Profit(1) Costs(1) EBITDA(1)
------ -------- -------- ---------
(In thousands)
For the quarter ended April 1, 2007:
Before adjustments for purchase accounting and
compensation expense related to equity interests
granted in asset management segment holding
company (2).................................... $15,853 $ 2,836 $ 494 $ 3,330
Amortization of intangible assets recorded in
purchase accounting............................ -- (757) 757 --
Compensation expense related to equity interest
granted in asset management segment holding
company (3).................................... -- (423) -- (423)
Other adjustment................................... 25 25 -- 25
-------- --------- -------- --------
After adjustments for purchase accounting and
compensation expense related to equity interests
granted in asset management segment holding
company........................................$ 15,878 $ 1,681 $ 1,251 $ 2,932
======== ========= ======== ========
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 April 1, 2006:
Before purchase accounting and compensation
expense related to equity interests granted
in asset management segment holding
company adjustments (2)........................ $14,770 $ 2,618 $ 461 $ 3,079
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).................................... -- (997) -- (997)
Other adjustment................................... 26 26 -- 26
-------- --------- -------- --------
After purchase accounting and compensation
expense related to equity interests granted
in asset management segment holding
company adjustments............................$ 14,796 $ 625 $ 1,483 $ 2,108
======== ========= ======== ========
<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 first quarter.
(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.
</FN>