EXHIBIT 99.1
Triarc Companies, Inc.
280 Park Avenue
New York, NY 10017
For Immediate Release
CONTACT: Anne A. Tarbell
(212) 451-3030
www.triarc.com
TRIARC REPORTS SECOND QUARTER AND FIRST HALF 2007 RESULTS
New York, NY, August 10, 2007 - Triarc Companies, Inc. (NYSE: TRY; TRY.B)
announced today the results of operations for its second fiscal quarter and
first fiscal half ended July 1, 2007.
Consolidated Highlights
o Consolidated revenues increased to $316.8 million in the 2007 second
quarter ($618.9 million in the 2007 first half) from $307.6 million in the
2006 second quarter ($599.6 million in the 2006 first half), primarily
reflecting the net opening of additional Arby's(R) restaurants with
generally higher average unit volumes, as well as slightly higher
restaurant royalties.
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 $16.8 million in the 2007
second quarter ($32.7 million in the 2007 first half) from $15.8 million
in the 2006 second quarter ($30.6 million in the 2006 first half). This
increase principally reflects asset management fees from increased assets
under management in the 2007 periods.
o Consolidated operating loss was $(68.5) million in the 2007 second quarter
($(60.0) million in the 2007 first half), compared with operating profit
of $13.4 million in the 2006 second quarter ($13.1 million in the 2006
first half). These changes primarily reflect the effects of an increase in
facilities relocation and corporate restructuring charges, as discussed
below, of $78.2 million for the 2007 second quarter ($77.8 million for the
2007 first half).
o Consolidated earnings (loss) before interest, taxes, depreciation and
amortization ("EBITDA") (which we define as operating profit (loss) plus
depreciation and amortization, other than amortization of deferred
financing costs) decreased to $(50.1) million in the 2007 second quarter
($(25.6) million in the 2007 first half), compared with $28.1 million in
the 2006 second quarter ($41.2 million in the 2006 first half) primarily
reflecting the effect of the facilities relocation and corporate
restructuring charges noted above. The attached table provides the
calculation of EBITDA and a reconciliation of EBITDA to our consolidated
net income (loss).
o Consolidated net income (loss) decreased to $(28.0) million, or $(0.30)
per diluted Class A and Class B, Series 1, share in the 2007 second
quarter (net loss of $(21.0) million in the 2007 first half or $(0.23) per
diluted Class A and Class B, Series 1, share), compared with net income of
$3.2 million, or $0.04 per diluted Class A and Class B, Series 1, share in
the 2006 second quarter (net loss of $(9.5) million, or $(0.11) per
diluted Class A and Class B, Series 1, share in the 2006 first half).
These changes principally reflect the after-tax effect of the increases in
facilities relocation and corporate restructuring charges, partially
offset by $12.8 million from the recognition of a previously unrecognized
deferred tax benefit as discussed below, $5.4 million of after-tax gains
realized on several cost method investments that had been held in deferred
compensation trusts and, with respect to the 2007 first half, $8.6 million
from the after-tax loss on early extinguishments of debt in the 2006 first
half that did not recur in the 2007 first half and $8.0 million from the
after-tax gain on sale of one of our available-for-sale investments in the
2007 first quarter.
o Consolidated depreciation and amortization was $18.4 million in the 2007
second quarter ($34.4 million in the 2007 first half) versus $14.7 million
in the 2006 second quarter ($28.1 million in the 2006 first half). These
increases principally reflect the additional depreciation and amortization
related to 41 net restaurants added since July 2, 2006, as well as
impairment charges related to asset management contracts for two
collateralized debt obligations ("CDOs").
o Facilities relocation and corporate restructuring charges were $79.0
million in the 2007 second quarter ($79.4 million in the 2007 first half)
compared with $0.8 million in the 2006 second quarter ($1.6 million in the
2006 first half). The charges in the 2007 periods principally reflect
costs related to negotiated contractual settlements with our Chairman and
then Chief Executive Officer, our Vice Chairman and then President and
Chief Operating Officer (the "Executives") evidencing the termination of
their employment agreements and providing for their resignation as
executive officers as of June 29, 2007, as well as payments due to another
former senior executive, in connection with the transfer of substantially
all of our senior executive responsibilities to the Arby's Restaurant
Group management team in Atlanta, Georgia and in light of our pending
Deerfield sale as discussed below.
o Consolidated interest expense was $15.3 million in the 2007 second quarter
($30.7 million in the 2007 first half), compared with $38.2 million in the
2006 second quarter ($65.6 million in the 2006 first half). These
decreases principally reflect 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 had consolidated and which employed leverage in its investment
strategies.
o Loss on the early extinguishments of debt of $0.9 million in the 2006
second quarter ($13.5 million in the 2006 first half) related to a
prepayment of $45.0 million principal amount of our term loans in the 2006
second quarter and, for the first six months of 2006, the effective
conversion of $167.4 million principal amount of our 5% Convertible Notes
due 2023. The loss for the 2006 second quarter reflected the write-off of
deferred financing costs and for the 2006 first half reflected negotiated
inducement premiums aggregating $8.7 million and the write-off of $4.8
million of deferred financing costs.
o Consolidated net investment income decreased to $17.6 million in the 2007
second quarter ($40.8 million in the 2007 first half), compared with $30.8
million in the 2006 second quarter ($51.7 million in the 2006 first half).
These decreases reflect lower interest income as a result of the effective
redemption of the Opportunities Fund as of September 29, 2006, partially
offset by increases in our recognized net gains. The increases in
recognized net gains reflect $8.4 million of gains realized on several
cost method investments as noted above and, with respect to the 2007 first
half, a $12.8 million gain on sale of one of our available-for-sale
investments in the 2007 first quarter.
o Results for the 2007 periods include gains of $2.6 million, compared with
a gain of $2.3 million in the 2006 first half, relating to sales of common
stock of Encore Capital Group, Inc. (NASDAQ: ECPG), which had been an
equity investment of ours. As a result of the aggregate sales, we now own
less than 1% of Encore.
o The benefits from income taxes in the 2007 periods reflect $12.8 million
from the recognition of a previously unrecognized contingent tax benefit
in connection with the settlement of certain obligations to the Executives
relating to deferred compensation trusts during the 2007 second quarter,
for which the related expense was principally recognized in prior years
for financial statement purposes.
Restaurant Operations Highlights
o Systemwide same-store sales were essentially unchanged in the 2007 periods
versus an increase of 2% in the 2006 second quarter (3% in the 2006 first
half), as increases in the same-store sales of franchised restaurants were
offset by decreases in same-store sales of company-owned restaurants.
o We currently expect systemwide same-store sales to be positive for the
2007 fiscal year, driven by the anticipated performance of various
initiatives, such as (1) a major new product introduction with
accompanying increased advertising support, including couponing, (2) the
effect of selective price increases implemented in November 2006 and
anticipated additional selective price increases, including price
adjustments under our value program and (3) the use of limited time menu
items. In addition to the anticipated positive effect of same-store sales
growth, revenues should also be positively impacted by increases in
company-owned and franchised restaurants. We presently plan to open
approximately 25 new company-owned restaurants during the remainder of
2007.
o Net sales from the company-owned Arby's restaurants were $278.6 million in
the 2007 second quarter ($545.1 million in the 2007 first half), compared
with $270.6 million in the 2006 second quarter ($529.4 million in the 2006
first half). The 2007 increases reflect the addition of 41 net
company-owned restaurants since July 2, 2006. Same-store sales for
company-owned restaurants decreased 2% in the 2007 periods. The decrease
in the 2007 periods primarily reflects a continuing deterioration of
economic conditions in the Michigan and Ohio regions where we have a
disproportionate number of company-owned stores, advertising and
promotions that were not as effective in the 2007 periods as those in the
2006 periods, the effect of price discounting under a value program and,
with respect to the 2007 first half, poor weather conditions in the
northern and central regions of the United States in the 2007 first
quarter.
o Royalties and franchise and related fees increased to $21.4 million in the
2007 second quarter ($41.1 million in the 2007 first half), compared with
$21.2 million in the 2006 second quarter ($39.6 million in the 2006 first
half), due primarily to 86 openings of franchised restaurants since July
2, 2006, with generally higher than average sales volumes, and the 8
restaurants that we sold to franchisees since July 2, 2006 replacing the
royalties from 31 generally underperforming franchised restaurants closed
and the elimination of royalties from the 9 restaurants we acquired from
franchisees since July 2, 2006. The increase for the 2007 second quarter
also reflected a 1% increase in same-store sales of the franchised
restaurants (relatively flat in the 2007 first half). The increase
reflects the full period effect of local marketing initiatives implemented
by our franchisees principally during the 2006 second quarter, including
more effective local television advertising and increased couponing,
similar to those we were already using for company-owned restaurants
throughout the 2006 second quarter and the effect of the selective price
increases that were implemented in November 2006, partially offset by the
effect of poor weather conditions which decreased customer traffic in the
Missouri, Texas and Oklahoma regions where we have a large number of
franchised restaurants.
o The gross margin (difference between net sales and cost of sales divided
by net sales) for our company-owned restaurants decreased to 26% of sales
in the 2007 second quarter (27% in the 2007 first half) from 28% in the
2006 second quarter (27% in the 2006 first half). The 2% decrease in our
overall gross margin for the 2007 second quarter reflects the effects of
(1) the price discounting associated with the value program noted above
and (2) increases in our cost of beef. These negative factors were
partially offset by the effects of (1) our continuing implementation of
the more effective operational procedures of the Arby's restaurants we
acquired from RTM Restaurant Group in July 2005 at the restaurants we
owned prior to the RTM Acquisition and (2) the effect of the selective
price increases that were implemented in November 2006. For the 2007 first
half, the positive factors noted above, along with decreased beverage
costs were fully offset by the negative factors noted above.
o Our restaurant business operating profit decreased to $24.1 million in the
2007 second quarter ($46.8 million in the 2007 first half) versus $27.0
million in the 2006 second quarter ($46.2 million in the 2006 first half).
The decrease for the 2007 second quarter reflects lower gross profit
(sales less cost of sales), higher depreciation and amortization and
higher advertising and promotions, all partially offset by lower general
and administrative expenses. For the 2007 first half, the slight increase
reflected higher gross profit and lower advertising and promotions,
substantially offset by higher depreciation and amortization.
o Depreciation and amortization for our restaurant operations was $14.9
million in the 2007 second quarter ($28.5 million in the 2007 first half)
versus $12.2 million in the 2006 second quarter ($23.0 million in the 2006
first half). These increases principally reflect the additional
depreciation and amortization related to 41 net restaurants added since
July 2, 2006, as well as charges related to disposal of properties and an
underperforming restaurant.
o Restaurant business EBITDA was $38.9 million in the 2007 second quarter
($75.3 million in the 2007 first half), compared with $39.2 million in the
2006 second quarter ($69.2 million in the 2006 first half) primarily
reflecting 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 second quarter, the Arby's system opened 28 new units (60 in
the 2007 first half) and closed 13 (24 in the 2007 first half) generally
underperforming units. We plan to open approximately 25 new company-owned
units during the remainder of 2007. As of July 1, 2007, Arby's had
commitments from franchisees to build 354 new units through 2013.
Asset Management Highlights
o Triarc accounts for Deerfield, its asset management business, as a
consolidated subsidiary with a minority interest. For the 2007 second
quarter, Deerfield's reported asset management and related fees, operating
profit, depreciation and amortization and EBITDA, after the effects of
purchase accounting adjustments associated with the Deerfield acquisition
in July 2004 and, for the 2007 second quarter, compensation expense
related to equity interests granted in November 2005 in our asset
management segment holding company and before the effect of minority
interests, were $16.8 million, $0.9 million, $2.5 million and $3.4
million, respectively. For the 2006 second quarter, those amounts were
$15.8 million, $1.7 million, $1.4 million and $3.1 million, respectively.
For the 2007 first half, those amounts were $32.7 million, $2.6 million,
$3.7 million and $6.3 million, respectively, compared to $30.6 million,
$2.3 million, $2.9 million and $5.2 million, respectively, in the first
half of 2006. The increases in operating profit and EBITDA for the first
half of 2007 versus the prior year period reflected increases in
management fees, structuring and other related fees associated with new
CDOs and existing CDOs and Funds, partially offset by the effect of lower
incentive fees. 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 2007 second quarter, compensation
expense related to the equity interests noted above, Deerfield's asset
management and related fees, operating profit, depreciation and
amortization and EBITDA, before the effect of minority interests, were
$16.8 million, $3.7 million, $0.6 million and $4.3 million, respectively.
For the 2006 second quarter, those amounts were $15.8 million, $3.2
million, $0.4 million and $3.7 million, respectively. For the 2007 first
half, those amounts were $32.7 million, $6.6 million, $1.1 million and
$7.7 million, respectively, compared to $30.6 million, $5.8 million, $0.9
million and $6.7 million, respectively in the first half of 2006. The
attached table provides a reconciliation of these measures to the
corresponding measures without exclusion of the effects of purchase
accounting adjustments associated with the Deerfield acquisition and the
grant of equity interests in our subsidiary Triarc Deerfield Holdings,
LLC, which is the majority owner of Deerfield.
o As of August 1, 2007, Deerfield had approximately $14.8 billion of assets
under management ("AUM"). Deerfield's AUM at August 1, 2007 consisted of
approximately $12.9 billion in 30 CDOs and a structured loan fund,
approximately $838 million in four hedge funds, approximately $762 million
in a real estate investment trust and approximately $345 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 $762.0 million in assets under management as of August 1, 2007. Triarc
and its subsidiaries beneficially own approximately 2.8% of Deerfield
Triarc's common stock (including approximately 2% that is held in deferred
compensation trusts that will be distributed in December 2007 to the
Executives). We expect to own approximately 15% of Deerfield Triarc
(including the shares held in the deferred compensation trusts and the
shares to be held in escrow to satisfy any post-closing indemnification or
payment obligations) after the sale of Deerfield, which is discussed
below.
o Although market conditions for asset securitizations are currently
difficult, Deerfield and Deerfield Triarc launched DFR Middle Market CLO
Ltd., a $300 million middle market collateralized loan obligation ("CLO")
transaction on July 17, 2007. Additionally, Deerfield launched Bryn Mawr
CLO II, Ltd., a $465 million (fully ramped) bank loan CLO on July 31, 2007
and on August 2, 2007 Deerfield also launched its second Euro CLO,
Gillespie CLO PLC, a 300 EUR (approximately $410 million) CLO. The assets
in Gillespie CLO PLC are not included in the August 1, 2007 AUM reported
above.
Corporate Restructuring Update
Triarc also said today that it expects to complete the previously announced
sale of its controlling interest in its asset management business (Deerfield) to
Deerfield Triarc in the third quarter of 2007.
Gregory Sachs, the Chairman of Deerfield and formerly a director of Triarc,
and certain of his affiliates, have exercised their right under Deerfield's
operating agreement to put their approximately 26% capital interest and 25%
profits interest in Deerfield to Triarc. In consideration for their interest,
Triarc will pay to Mr. Sachs and his affiliates a purchase price, in cash,
pursuant to a formula that is based on a total equity value of Deerfield
(negotiated by the parties for this purpose only), of approximately $285
million, subject to reduction under certain circumstances. The closing of that
transaction will occur concurrently with the sale of Deerfield and Triarc will
sell the interest that it acquires from Mr. Sachs and his affiliates to DFR in
accordance with the terms of the Deerfield purchase and sale agreement.
Alternatives for the DFR shares to be received by Triarc are under review
and could include a special dividend or distribution to Triarc's shareholders.
The shares could also be sold or hypothecated by Triarc and the cash proceeds
used for potential acquisitions by Triarc of other restaurant companies.
Following completion of the sale of Deerfield, Triarc's sole operating
business will be its Arby's restaurant business. As a result, Triarc will be a
"pure play" publicly traded restaurant company. Triarc expects to change its
name to reflect its new identity as a publicly traded restaurant company. Triarc
is also considering financing opportunities to further its goal of significantly
increasing value through the acquisition of other restaurant companies.
As previously announced, to facilitate its transition to a "pure play"
restaurant company and to reduce corporate costs, Triarc is in the process of
consolidating its corporate operations and headquarters in Atlanta, Georgia with
its Arby's operations, and transferring senior executive responsibilities from
its New York City offices to the Arby's Restaurant Group ("ARG") executive team
in Atlanta.
Commenting on recent developments, Nelson Peltz, Triarc's non-executive
Chairman, said: "With the sale of Deerfield nearly complete, Triarc will become
a "pure play" restaurant company, with Roland Smith as its Chief Executive
Officer. Today, Arby's is well positioned for continued growth - both
organically and through acquisitions - with its strong cash flow generation,
best-in-class restaurant operations, excellent brand concept and highly
supportive franchisee network. As Triarc finalizes its corporate restructuring
over the next several months, we believe that Arby's potential will become
apparent."
Peter W. May, Triarc's non-executive Vice Chairman, added: "Going forward,
along with Triarc's other directors, Nelson Peltz, Ed Garden and I look forward
to providing Roland with strategic guidance and helping him as he navigates the
many opportunities ahead."
Roland C. Smith, Triarc's Chief Executive Officer, added: "This is an
exciting time at Triarc. We have a strong team in place to capitalize on
continued growth opportunities. We are looking forward to operating as a
standalone restaurant company and continuing to build increased value for our
shareholders."
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 July 1, 2007, 1,081 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 $14.8 billion under management as of August 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 25 new company-owned units
during the remainder of 2007 or that our franchisees will honor their
commitments to build 354 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, [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. [On August 9, 2007, the transaction was
approved by Deerfield Triarc's stockholders representing (1) a majority
of the votes cast at the meeting to approve the transaction and (2) a
majority of the votes cast by stockholders not affiliated with
Deerfield.] 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, and 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 the real estate investment trust or
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 December
31, 2006 (the "Form 10-K") (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; disruption in
the services DFR receives from its Manager, such as 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; the recent dislocations in the sub-prime mortgage sector and
weakness in the broader mortgage market, and their potential effect on
our ability to obtain financing, DFR's financial costs, the marketability
and value of DFR's portfolio securities, DFR's book value, DFR's
compliance with REIT qualification requirements, and other aspects of
DFR's business; the various risks relating to the Deerfield transaction,
including the dilution of DFR common stock, the indebtedness DFR will
incur to complete the transaction, the ongoing risks of Deerfield's
business (such as a decline in advisory fee revenue due to weak
investment performance or withdrawal of client assets under management)
and Deerfield's revenue being subject to income tax; 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 many of which are beyond DFR's
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
Second Quarter and Six Months Ended July 2, 2006 and July 1, 2007
Second Quarter Ended Six Months Ended
2006 2007 2006 2007
---- ---- ---- ----
(In thousands except per share amounts)
(Unaudited)
Revenues:
Net sales............................................$ 270,555 $ 278,572 $ 529,397 $ 545,070
Royalties and franchise and related fees............. 21,234 21,408 39,622 41,078
Asset management and related fees.................... 15,828 16,841 30,624 32,719
--------- --------- --------- ---------
307,617 316,821 599,643 618,867
--------- --------- --------- ---------
Costs and expenses:
Cost of sales, excluding depreciation and
amortization....................................... 194,017 204,887 386,401 399,859
Cost of services, excluding depreciation and
amortization....................................... 5,910 6,308 11,430 13,198
Advertising and promotions........................... 19,842 20,658 39,910 38,387
General and administrative, excluding depreciation
and amortization................................... 58,345 55,975 118,495 113,558
Depreciation and amortization, excluding
amortization of deferred financing costs........... 14,703 18,404 28,064 34,389
Facilities relocation and corporate restructuring.... 775 79,044 1,578 79,447
Loss on settlement of unfavorable franchise rights... 658 -- 658 --
--------- --------- --------- ---------
294,250 385,276 586,536 678,838
--------- --------- --------- ---------
Operating profit (loss).......................... 13,367 (68,455) 13,107 (59,971)
Interest expense....................................... (38,246) (15,286) (65,622) (30,675)
Loss on early extinguishment of debt................... (933) -- (13,477) --
Investment income, net................................. 30,796 17,625 51,746 40,773
Gain on sale of unconsolidated business................ -- 2,561 2,256 2,558
Other income, net...................................... 3,699 597 5,436 2,207
--------- --------- --------- ---------
Income (loss) from continuing operations before
income taxes and minority interests ........... 8,683 (62,958) (6,554) (45,108)
(Provision for) benefit from income taxes.............. (2,705) 36,002 2,932 28,559
Minority interests in income of consolidated
subsidiaries...................................... (2,608) (1,067) (5,698) (4,264)
---------- ---------- --------- --------
Income (loss) from continuing operations......... 3,370 (28,023) (9,320) (20,813)
Loss from discontinued operations...................... (139) -- (215) (149)
--------- --------- --------- ---------
Net income (loss)..............................$ 3,231 $ (28,023) $ (9,535) $ (20,962)
========= ========= ========= =========
EBITDA (a).............................................$ 28,070 $ (50,051) $ 41,171 $ (25,582)
========= ========= ========= =========
Basic and diluted income (loss) from continuing
operations and net income (loss)
per share of Class A common stock
and Class B common stock.............................$ .04 $ (.30) $ (.11) $ (.23)
========= ======== ======== =========
Shares used to calculate income (loss) per share:
Class A common stock
Basic.............................................. 27,622 28,821 26,795 28,790
========= ========= ========= =========
Diluted............................................ 28,583 28,821 (b) 26,795 (b) 28,790 (b)
========= ========= ========= =========
Class B common stock
Basic.............................................. 59,939 63,490 58,141 63,389
========= ========= ========= =========
Diluted............................................ 62,816 63,490 (b) 58,141 (b) 63,389 (b)
========= ========= ========= =========
(a) The calculation of EBITDA by segment and a reconciliation of consolidated
EBIDTA to net income (loss) follow:
Second Quarter Ended Six Months Ended
-------------------- ----------------
2006 2007 2006 2007
---- ---- ---- ----
(In thousands)
Operating profit (loss):
Restaurants................................................$ 27,007 $ 24,061 $ 46,161 $ 46,828
Asset management .......................................... 1,648 934 2,273 2,615
General corporate.......................................... (15,288) (93,450) (35,327) (109,414)
--------- --------- ---------- --------
Consolidated operating profit (loss)...................... 13,367 (68,455) 13,107 (59,971)
--------- --------- ---------- --------
Plus: depreciation and amortization, excluding amortization
of deferred financing costs:
Restaurants................................................ 12,203 14,850 22,996 28,485
Asset management........................................... 1,448 2,463 2,931 3,714
General corporate.......................................... 1,052 1,091 2,137 2,190
--------- --------- ---------- --------
Consolidated depreciation and amortization, excluding
amortization of deferred financing costs................ 14,703 18,404 28,064 34,389
--------- --------- ---------- --------
EBITDA:
Restaurants................................................ 39,210 38,911 69,157 75,313
Asset management........................................... 3,096 3,397 5,204 6,329
General corporate.......................................... (14,236) (92,359) (33,190) (107,224)
--------- --------- ---------- --------
Consolidated EBITDA....................................... 28,070 (50,051) 41,171 (25,582)
Depreciation and amortization, excluding amortization
of deferred financing costs................................ (14,703) (18,404) (28,064) (34,389)
Interest expense.............................................. (38,246) (15,286) (65,622) (30,675)
Loss on early extinguishment of debt.......................... (933) -- (13,477) --
Investment income, net........................................ 30,796 17,625 51,746 40,773
Gain on sale of unconsolidated business....................... -- 2,561 2,256 2,558
Other income, net............................................. 3,699 597 5,436 2,207
--------- --------- ---------- --------
Income (loss) from continuing operations before income
taxes and minority interests............................ 8,683 (62,958) (6,554) (45,108)
(Provision for) benefit from income taxes..................... (2,705) 36,002 2,932 28,559
Minority interests in income of consolidated subsidiaries..... (2,608) (1,067) (5,698) (4,264)
--------- --------- ---------- --------
Income (loss) from continuing operations.................. 3,370 (28,023) (9,320) (20,813)
Loss from discontinued operations............................. (139) -- (215) (149)
--------- --------- ---------- --------
Net income (loss).........................................$ 3,231 $ (28,023) $ (9,535) $(20,962)
========= ========= ========== ========
<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 second quarter and six
months ended July 1, 2007 and the six months ended July 2, 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.
(c) The reconciliation of certain operating measures of Deerfield before
purchase accounting and compensation expense related to equity interests
granted in asset management segment holding company adjustments to those
measures after such adjustments for the 2007 second quarter and first six
months, and 2006 second quarter and first six months ended follows:
</FN>
Depreciation and
Amortization,
Excluding
Asset Amortization
Management of Deferred
and Related Operating Financing
Fees(1) Profit(1) Costs(1) EBITDA(1)
--------- -------- ---------- ---------
(In thousands)
For the quarter ended July 1, 2007:
Before adjustments for purchase accounting and
compensation expense related to equity
interests granted in asset management
segment holding company (2) ................... $16,815 $ 3,723 $ 611 $ 4,334
Expected asset management fees recorded as a
receivable in purchase accounting.............. 26 26 -- 26
Amortization of intangible assets recorded in
purchase accounting............................ -- (1,852) 1,852 --
Compensation expense related to equity interests
granted in asset management segment holding
company (3).................................... -- (963) -- (963)
------- --------- -------- --------
After adjustments for purchase accounting and
compensation expense related to equity
interests granted in asset management
segment holding company........................ $ 16,841 $ 934 $ 2,463 $ 3,397
======== ========= ======== ========
For the six months ended July 1, 2007:
Before adjustments for purchase accounting and
compensation expense related to equity
interests granted in asset management
segment holding company (2) .....................$32,668 $ 6,558 $ 1,106 $ 7,664
Expected asset management fees recorded as a
receivable in purchase accounting.............. 51 51 -- 51
Amortization of intangible assets recorded in
purchase accounting............................ -- (2,608) 2,608 --
Compensation expense related to equity interests
granted in asset management segment holding
company (3).................................... -- (1,386) -- (1,386)
------- --------- -------- --------
After adjustments for purchase accounting and
compensation expense related to equity
interests granted in asset management segment
holding company................................ $ 32,719 $ 2,615 $ 3,714 $ 6,329
======== ========= ======== ========
Depreciation and
Amortization,
Excluding
Asset Amortization
Management of Deferred
and Related Operating Financing
Fees(1) Profit(1) Costs(1) EBITDA(1)
----------- -------- ---------- ---------
(In thousands)
For the quarter ended July 2, 2006:
Before adjustments for purchase accounting and
compensation expense related to equity
interests granted in asset management
segment holding company (2) ................... $15,802 $ 3,225 $ 426 $ 3,651
Expected asset management fees recorded as a
receivable in purchase accounting.............. 26 26 -- 26
Amortization of intangible assets recorded in
purchase accounting............................ -- (1,022) 1,022 --
Compensation expense related to equity interests
granted in asset management segment holding
company (3).................................... -- (581) -- (581)
------- --------- -------- --------
After adjustments for purchase accounting and
compensation expense related to equity
interests granted in asset management
segment holding company....................... $ 15,828 $ 1,648 $ 1,448 $ 3,096
======== ========= ======== ========
For the six months ended July 2, 2006:
Before adjustments for purchase accounting and
compensation expense related to equity
interests granted in asset management segment
holding company (2) ........................... $30,573 $ 5,845 $ 887 $ 6,732
Expected asset management fees recorded as a
receivable in purchase accounting.............. 51 51 -- 51
Amortization of intangible assets recorded in
purchase accounting............................ -- (2,044) 2,044 --
Compensation expense related to equity interests
granted in asset management segment holding
company (3).................................... -- (1,579) -- (1,579)
------- --------- -------- --------
After adjustments for purchase accounting and
compensation expense related to equity
interests granted in asset management
segment holding company....................... $ 30,624 $ 2,273 $ 2,931 $ 5,204
======== ========= ======== ========
<FN>
- ---------------
(1) All amounts are before the effects of minority interests.
(2) The asset management and related fees, operating profit and EBITDA
before purchase accounting adjustments reflect the elimination of
asset management fees paid to Deerfield by Triarc of $0.5 million for
the 2006 second quarter and $0.9 million for the six months ended
July 2, 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.
</FN>