EXHIBIT 99.2
------------
ARBY'S RESTAURANT GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
JANUARY 2, APRIL 3,
2005 2005
--------- ---------
(IN THOUSANDS)
(UNAUDITED)
ASSETS
Current assets:
Cash and cash equivalents ..................................... $ 19,418 $ 19,061
Receivables ................................................... 13,719 12,931
Inventories ................................................... 2,222 2,125
Deferred income tax benefit ................................... 3,698 3,698
Prepaid expenses .............................................. 4,109 4,090
--------- ---------
Total current assets .......................................... 43,166 41,905
Restricted cash equivalents ...................................... 30,547 30,555
Properties ....................................................... 58,739 57,360
Goodwill ......................................................... 64,153 64,153
Other intangible assets .......................................... 6,426 6,180
Deferred income tax benefit ...................................... 27,033 27,921
Due from an affiliate ............................................ 2,944 2,944
Deferred costs and other assets .................................. 7,069 9,256
--------- ---------
$ 240,077 $ 240,274
========= =========
LIABILITIES AND STOCKHOLDER'S DEFICIT
Current liabilities:
Current portion of long-term debt ............................. $ 31,764 $ 31,553
Accounts payable .............................................. 10,530 12,087
Accrued expenses .............................................. 25,359 21,160
--------- ---------
Total current liabilities ..................................... 67,653 64,800
Long-term debt ................................................... 255,669 247,545
Notes payable to an affiliate .................................... 27,636 31,136
Other liabilities and deferred income ............................ 23,298 23,065
Stockholder's deficit:
Common stock .................................................. 1 1
Additional paid-in capital .................................... 42,597 47,202
Accumulated deficit ........................................... (176,514) (173,231)
Accumulated other comprehensive deficit ....................... (263) (244)
--------- ---------
Total stockholder's deficit ................................. (134,179) (126,272)
--------- ---------
$ 240,077 $ 240,274
========= =========
ARBY'S RESTAURANT GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED INCOME STATEMENTS
THREE MONTHS ENDED
----------------------------
MARCH 28, APRIL 3,
2004 2005
-------- --------
(IN THOUSANDS)
(UNAUDITED)
Revenues:
Net sales ............................................................................... $ 46,724 $ 51,190
Royalties and franchise and related fees ................................................ 22,467 23,579
-------- --------
69,191 74,769
-------- --------
Costs and expenses:
Cost of sales, excluding depreciation and amortization .................................. 37,385 39,189
Advertising and selling ................................................................. 4,167 4,583
General and administrative, excluding depreciation and amortization ..................... 13,629 13,934
Depreciation and amortization, excluding amortization of deferred financing costs ....... 2,015 2,936
-------- --------
57,196 60,642
-------- --------
Operating profit .................................................................. 11,995 14,127
Interest expense ............................................................................. (6,885) (6,571)
Insurance expense related to long-term debt .................................................. (991) (904)
Other income (expense), net .................................................................. 144 (1,068)
-------- --------
Income before income taxes ........................................................ 4,263 5,584
Provision for income taxes ................................................................... (1,661) (2,301)
-------- --------
Net income ........................................................................ $ 2,602 $ 3,283
======== ========
2
ARBY'S RESTAURANT GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDER'S DEFICIT
(IN THOUSANDS)
(UNAUDITED)
ACCUMULATED OTHER
COMPREHENSIVE
DEFICIT
----------------------------
ADDITIONAL CURRENCY UNRECOGNIZED
COMMON PAID-IN ACCUMULATED TRANSLATION PENSION
STOCK CAPITAL DEFICIT ADJUSTMENT LOSS TOTAL
--------- --------- ----------- ----------- ------------ ----------
Balance at January 2, 2005 ......... $ 1 $ 42,597 $(176,514) $ 19 $ (282) $(134,179)
Comprehensive income:
Net income .................... -- -- 3,283 -- -- 3,283
Net change in currency
translation adjustment ...... -- -- -- 19 -- 19
Comprehensive income .......... 3,302
Cash capital contributions ...... -- 5,800 -- -- -- 5,800
Cash dividends .................. -- (1,195) -- -- -- (1,195)
--------- --------- ---------- --------- ---------- ----------
Balance at April 3, 2005 ........... $ 1 $ 47,202 $(173,231) $ 38 $ (282) $(126,272)
========= ========= ========== ========= ========== ==========
3
ARBY'S RESTAURANT GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED
--------------------------------
MARCH 28, APRIL 3,
2004 2005
-------- --------
(IN THOUSANDS)
(UNAUDITED)
Cash flows from operating activities:
Net income ................................................................... $ 2,602 $ 3,283
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
Depreciation and amortization of properties ............................. 1,763 2,651
Amortization of other intangible assets ................................. 252 285
Amortization of deferred financing costs and original issue discount .... 412 372
Deferred income tax benefit ............................................. (1,482) (888)
Unfavorable lease liability recognized .................................. (438) (290)
Deferred vendor incentive recognized .................................... (386) --
Provision for doubtful accounts ......................................... 37 80
Interest income on restricted cash equivalents .......................... (18) (105)
Other, net .............................................................. 273 100
Changes in operating assets and liabilities:
(Increase) decrease in receivables .................................. (686) 708
Decrease in inventories ............................................. 54 97
(Increase) decrease in prepaid expenses ............................. (202) 19
Decrease in accounts payable and accrued expenses ................... (4,700) (2,629)
-------- --------
Net cash provided by (used in) operating activities .............. (2,519) 3,683
-------- --------
Cash flows from investing activities:
Cost of business acquisitions .................................................... -- (2,556)
Capital expenditures ............................................................. (1,045) (1,201)
Other, net ....................................................................... (6) (34)
-------- --------
Net cash provided by (used in) investing activities .............. (1,051) (3,791)
-------- --------
Cash flows from financing activities:
Repayments of long-term debt ..................................................... (7,307) (8,451)
Dividends paid ................................................................... -- (1,195)
Cash capital contributions ....................................................... 6,200 5,800
Borrowings from an affiliate ..................................................... 2,000 3,500
Transfers from restricted cash equivalents collateralizing long-term debt ........ 23 97
-------- --------
Net cash provided by (used in) financing activities .............. 916 (249)
-------- --------
Net decrease in cash and cash equivalents ........................................ (2,654) (357)
Cash and cash equivalents at beginning of period ................................. 21,272 19,418
-------- --------
Cash and cash equivalents at end of period ....................................... $ 18,618 $ 19,061
======== ========
4
ARBY'S RESTAURANT GROUP, INC. AND SUBSIDIARIES
SUMMARY HISTORICAL FINANCIAL INFORMATION
(UNAUDITED)
FISCAL YEAR ENDED
----------------------------------------------------- TWELVE MONTHS
DECEMBER 29, DECEMBER 28, JANUARY 2, ENDED
($ in millions) 2002 (2) 2003 2005 APRIL 3, 2005
- ---------------------------------------------------------------------------------------------------------- --------------
INCOME STATEMENT
Royalties & Franchise and Related Fees (1) $ 97.8 $ 92.1 $100.9 $102.0
Restaurant Sales 0.0 201.5 205.6 210.1
============== ============== ============== ==============
Total Revenues $ 97.8 $293.6 $306.5 $312.1
Cost of Sales 0.0 151.6 162.6 164.4
============== ============== ============== ==============
Gross Profit $ 97.8 $142.0 $143.9 $147.7
EBITDAR (3) 61.5 90.0 87.8 91.1
Rent 0.9 15.1 15.7 16.0
EBITDA (3) $ 60.6 $ 75.1 $ 72.1 $75.1
Depreciation & Amortization 1.0 8.5 12.9 10.5
============== ============== ============== ==============
EBIT (3) $ 59.6 $ 66.6 $ 59.2 $64.6
Interest Expense 21.8 29.2 27.3 27.0
Net Income 20.8 4.6 17.0 17.7
- ---------------------------------------------------------------------------------------------------------- --------------
Adjusted EBITDA $ 64.7 $ 79.3 $ 76.4 $79.4
Less: Interest Expense (5) (21.8) (29.2) (27.3) (27.0)
Less: Cash Income Taxes (4) (1.0) (2.5) (1.9) (6.9)
Plus: (Increase) / Decrease in Networking Capital 0.7 (9.8) (3.8) (0.1)
-------------- -------------- -------------- --------------
Operating Cash Flow $ 42.6 $ 37.8 $ 43.4 $45.4
Less: Capital Expenditures 0.0 (5.3) (13.7) (13.8)
-------------- -------------- -------------- --------------
Free Cash Flow $ 42.6 $ 32.5 $ 29.7 $31.6
============== ============== ============== ==============
EBITDA, as calculated 60.6 75.1 72.1 75.1
Triarc Management Fee 4.1 4.2 4.3 4.3
-------------- -------------- -------------- --------------
Adjusted EBITDA $ 64.7 $ 79.3 $ 76.4 $79.4
============== ============== ============== ==============
- ---------------------------
Note: Fiscal years 2002 - 2004 financial information derived from audited
financial statements
(1) Includes elimination of intercompany fees.
(2) The acquisition of Sybra, Inc., which owns and operates the ARG
company-owned restaurants, was completed on December 27, 2002. As such,
the 2002 period which ended on December 29, 2002 primarily reflects the
results of franchise operations.
(3) Includes addbacks for goodwill impairment charges of $22.0 million in
fiscal year 2003 and asset and other intangibles impairment charges of
$0.4 million and $3.4 million in fiscal year 2003 and fiscal year 2004,
respectively and $3.4 million in the twelve-months ended April 3, 2005.
(4) Cash income taxes for the twelve months ended April 3, 2005 is estimated
to be 38.9% of net income.
(5) Includes non-cash interest expense
5
ARG EBITDA RECONCILIATION
EBITDA consists of earnings before interest, taxes and depreciation
and amortization. As compared to the nearest GAAP measurement, EBITDA represents
net income plus or minus (1) interest and other income (expense), net, plus the
sum of (2) impairment of goodwill and other long-lived assets, (3) insurance
expense related to certain long-term debt (which will be repaid in connection
with the RTM Acquisition), (4) interest expense, (5) provision for income taxes
and (6) depreciation and amortization, excluding amortization of deferred
financing costs. The Company uses EBITDA as an internal measurement of operating
performance as well as assisting investors in the understanding of the Company's
performance by using a measure that is unaffected by changes in capital
structure or capital investment cycles. This term, as the Company defines it,
may not be comparable to a similarly titled measure used by other companies and
is not a measure of performance or liquidity presented in accordance with GAAP.
EBITDA should not be used as a substitute for net income, net cash provided by
or used in operations or other financial data prepared in accordance with GAAP.
A reconciliation of EBITDA, Adjusted EBITDA and EBITDAR to net income is
provided below:
FISCAL YEAR ENDED
--------------------------------------------- TWELVE MONTHS
ENDED
DECEMBER 29, DECEMBER 28, JANUARY 2, APRIL 3,
($ in millions) 2002 2003 2005 2005
- ------------------------------------------------------------------ -------------- -------------- ----------------
Net income $ 20.8 $ 4.6 $ 17.0 $ 17.7
Interest and other (income) expense, net (1.0) (0.4) (0.3) 0.9
Impairment of goodwill and other long-lived assets -- 22.0 3.4 3.4
Insurance expense related to long-term debt 4.5 4.2 3.9 3.8
Interest expense 21.8 29.2 27.3 27.0
Provision for income taxes 13.4 7.1 11.3 12.0
Depreciation and amortization, excluding amortization
of deferred financing costs 1.0 8.5 9.5 10.5
----------- -------------- -------------- ----------------
EBITDA $ 60.6 $ 75.1 $ 72.1 $ 75.1
Triarc management fee 4.1 4.2 4.3 4.3
----------- -------------- -------------- ----------------
ADJUSTED EBITDA $ 64.7 $ 79.3 $ 76.4 $ 79.4
=========== ============== ============== ================
EBITDA $ 60.6 $ 75.1 $ 72.1 $ 75.1
Rent expense 0.9 15.1 15.7 16.0
----------- -------------- -------------- ----------------
EBITDAR $ 61.5 $ 90.2 $ 87.8 $ 91.1
=========== ============== ============== ================
6
RTM Restaurant Group
Unaudited Combined Balance Sheets
(IN THOUSANDS)
MARCH 6, MAY 30,
2005 2004
--------- ---------
ASSETS
Current assets:
Cash and cash equivalents $ 10,846 $ 8,475
Income taxes receivable 2,163 2,498
Other receivables 4,063 4,858
Inventories 6,398 7,637
Prepaid expenses 9,782 8,124
Deferred income taxes 2,047 1,980
--------- ---------
Total current assets 35,299 33,572
Land, property and equipment:
Land 104,430 97,458
Property and equipment, net of accumulated depreciation of
$155,149 in 2005 and $148,462 in 2004, respectively 178,125 178,561
Capital leases, net of accumulated amortization of $17,905 in
2005 and $14,486 in 2004, respectively 45,277 43,506
--------- ---------
Land, property and equipment, net 327,832 319,525
Other assets:
Notes receivable, net of current portion and deferred gain 4,840 4,042
Goodwill 65,548 60,861
Other intangibles, net of accumulated amortization of $12,792 in
2005 and $12,638 in 2004, respectively 18,816 19,178
Other 10,477 9,017
--------- ---------
Total other assets 99,681 93,098
--------- ---------
Total assets $ 462,812 $ 446,195
========= =========
LIABILITIES AND NET CAPITAL DEFICIENCY
Current liabilities:
Accounts payable $ 42,983 $ 38,629
Accrued expenses 27,313 26,744
Current portion of long-term debt 29,452 29,112
Current portion of financing obligations 356 268
Current portion of capital lease obligations 4,226 3,898
--------- ---------
Total current liabilities 104,330 98,651
Long-term debt, net of current portion 183,407 190,293
Financing obligations, net of current portion 131,523 118,156
Capital lease obligations, net of current portion 46,327 43,712
Deferred income taxes 4,246 9,261
Other liabilities and deferred credits 31,803 24,126
--------- ---------
Total liabilities 501,636 484,199
Commitments and contingent liabilities
Net capital deficiency:
Common stock 2 2
Additional paid-in capital 14,618 14,570
Retained earnings 45,249 41,519
Treasury stock (20,720) (17,245)
Stock notes receivable (10,252) (10,480)
Notes and advances due from affiliates (67,721) (66,370)
--------- ---------
Net capital deficiency (38,824) (38,004)
--------- ---------
Total liabilities and net capital deficiency $ 462,812 $ 446,195
========= =========
7
RTM Restaurant Group
Unaudited Combined Statements of Operations
(IN THOUSANDS)
FORTY WEEKS ENDED
MARCH 6, FEBRUARY 29,
2005 2004
--------------------------------
Net sales $ 606,295 $ 550,769
Costs and expenses:
Costs of operations, excluding depreciation and amortization 488,809 449,209
General and administrative, excluding depreciation and amortization 63,034 55,072
Depreciation and amortization 22,334 17,739
--------------------------------
574,177 522,020
--------------------------------
Operating profit 32,118 28,749
Interest expense, net (27,543) (26,594)
Other income 1,026 992
--------------------------------
Income (loss) before income taxes and discontinued operations 5,601 3,147
Provision for income taxes 411 572
--------------------------------
Income (loss) from continuing operations 5,190 2,575
Income from discontinued operations, net of income taxes of
$1,978 and ($63) in 2005 and 2004, respectively 3,516 (742)
--------------------------------
Net (loss) income $ 8,706 $ 1,833
================================
8
RTM Restaurant Group
Unaudited Combined Statements of Net Capital Deficiency
(IN THOUSANDS)
NOTES AND
ADDITIONAL ADVANCES
COMMON PAID-IN RETAINED TREASURY STOCK NOTES DUE FROM
STOCK CAPITAL EARNINGS STOCK RECEIVABLE AFFILIATES TOTAL
----------------------------------------------------------------------------------------------
Balance at May 25, 2003 $ 2 $ 13,691 $ 34,717 - $ (11,505) $ (63,760) $ (26,855)
Net income - - 12,191 - - - 12,191
Repurchase of common stock and
members' interest - - (1,389) (17,696) 2,406 216 (16,463)
Sale of common stock - - - 451 - - 451
Vested stock awards - 879 - - - - 879
Shareholder loan transactions, net - - - - (1,381) - (1,381)
Dividends and distributions - - (4,000) - - - (4,000)
Loans to affiliates, net - - - - - (2,826) (2,826)
----------------------------------------------------------------------------------------------
Balance at May 30, 2004 2 14,570 41,519 (17,245) (10,480) (66,370) (38,004)
Net income - - 8,706 - - - 8,706
Repurchase of common stock and
members' interest - 48 - (3,475) - - (3,427)
Shareholder loan transactions, net - - - - 228 - 228
Dividends and distributions - - (4,976) - - - (4,976)
Loans to affiliates, net - - - - - (1,351) (1,351)
----------------------------------------------------------------------------------------------
Balance at March 6, 2005 $ 2 $14,618 $45,249 $(20,720) $(10,252) $(67,721) $(38,824)
==============================================================================================
9
RTM Restaurant Group
Unaudited Combined Statements of Cash Flows
(IN THOUSANDS)
FORTY WEEKS ENDED
---------------------------------
MARCH 6, FEBRUARY 29,
2005 2004
---------- ------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 8,706 $ 1,833
Adjustments to reconcile net income (loss) to net cash provided by
operating activities:
Depreciation and amortization, continuing operations 22,334 17,739
Depreciation and amortization, discontinued operations 70 1,934
Stock-based compensation (income) expense 5,550 (41)
Deferred income taxes (5,082) (1,692)
(Gain) loss on sales of units (490) (441)
Gain on sale of discontinued operations (4,940) --
Changes in operating assets and liabilities:
Income taxes receivable 335 (3,586)
Other receivables 562 2,958
Inventories 1,239 (571)
Accounts payable 4,354 14,934
Accrued expenses 466 (2,664)
Prepaid expenses (1,658) 3,459
Other liabilities and deferred credits 2,240 565
-------- --------
Net cash provided by operating activities 33,686 34,427
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of land, property, and equipment (12,260) (29,924)
Notes and advances due from affiliates (1,351) (2,305)
Additions to notes receivable (2,134) (1,389)
Collections on notes receivable 419 597
Proceeds from disposal of land and property 4,156 4,695
Purchase of other assets (2,711) (2,203)
Proceeds from disposal of other assets 912 13
-------- --------
Net cash used in investing activities (12,969) (30,516)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of long-term debt 13,135 29,625
Payments on long-term debt, financing and capital lease obligations (25,981) (26,882)
Repurchase of treasury stock and members' interest (976) (1,676)
Proceeds from sale of treasury stock 452 450
Payments of dividends and distributions (4,976) (4,000)
-------- --------
Net cash used in financing activities (18,346) (2,483)
-------- --------
Net increase (decrease) in cash and cash equivalents 2,371 1,428
Cash and cash equivalents at the beginning of the period 8,475 8,621
-------- --------
Cash and cash equivalents at the end of the period $ 10,846 $ 10,049
======== ========
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for interest $ 33,973 $ 32,919
Cash paid for income taxes, net of refunds $ 1,850 $ 1,808
NONCASH INVESTING AND FINANCING ACTIVITIES
Additions to capital lease and financing obligations $ 18,823 $ 20,378
Treasury stock acquired in exchange for notes receivable
and other consideration $ 4,342 $ 15,425
Note receivable taken on sale from sale of property,
plant and equipment $ 832 $ --
Cancellation of notes receivable from shareholders and
affiliates in share repurchases $ (1,391) $ 2,406
Net liabilities assumed, notes and accounts receivables forgiven
and notes payables given in purchase of restaurants $ 4,870 $ --
10
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS OF RTM
RESULTS OF OPERATIONS FOR THE YEAR ENDED MAY 30, 2004 COMPARED TO THE YEAR ENDED
MAY 25, 2003
NET SALES
RTM sales increased $32.1 million, or 5%, to $740.0 million in 2004 from $707.9
million in 2003. Higher sales reflected contributions from new stores totaling
$26.4 million and $14.3 million in sales for a 53rd week in 2004. The average
check rose 1.0% in 2004 but was more than offset by a decline in transactions
of 1.2%, due in part to a relative lack of new product offerings in 2004.
COST OF OPERATIONS, EXCLUDING DEPRECIATION AND AMORTIZATION
RTM's cost of operations, excluding depreciation and amortization, increased
$43.6 million, or 8%, in 2004 to $602.5 million reflecting a restaurant margin
of 18.6%, from $558.9 million in 2003, reflecting a restaurant margin of 21.0%.
Approximately $11.6 million of the increase in cost of operations was
attributable to the 53rd week in 2004. Food and paper costs rose from 26.5% of
net sales in 2003 to 28.2% of net sales in 2004 primary due to a 24% increase
in beef costs, the largest component of menu offerings
RESULTS OF OPERATIONS FOR THE YEAR ENDED MAY 25, 2003 COMPARED TO THE YEAR ENDED
MAY 26, 2002
NET SALES
RTM net sales increased $23.5 million or 3% to $707.9 million in 2003 from
$684.4 million for 2002. Higher sales reflect contributions from new restaurant
units totaling $27.7 million and a 0.2% increase in same-store sales, which
contributed a total of $1.3 million. The 0.2% increase in same-store sales
reflected an increase in average check, which was offset by a decline in
transactions. Higher same-store sales and contributions from new restaurant
units were partially offset by the impact of closing underperforming stores
($5.5 million).
COST OF OPERATIONS, EXCLUDING DEPRECIATION AND AMORTIZATION
RTM's cost of operations, excluding depreciation and amortization, increased
$15.9 million, or 3%, to $558.9 million in 2003, resulting in a restaurant
margin of 21.0%, from $543.0 million and a restaurant margin of 20.7% for the
same period in 2002. Cost of operations, excluding depreciation and
amortization, improved slightly in 2003 to 79.0% from 79.3% in 2002 as
improvements in food and paper costs were offset by higher payroll, employee
benefit, occupancy and other operating expenses. Food and paper costs improved
from 27.9% of net sales in 2002 to 26.5% of net sales in 2003 primarily due to a
10% reduction in beef costs, the largest component of menu offerings.
11
RTM SUMMARY HISTORICAL FINANCIAL INFORMATION
(UNAUDITED)
FISCAL YEAR ENDED
------------------------------------------------- TWELVE MONTHS
ENDED
MAY 26, MAY 25, MAY 30, MARCH 6,
($ in millions) 2002 2003 2005 2005
- ---------------------------------------------------------------------------------------------------------- --------------
INCOME STATEMENT
Revenues $684.4 $707.9 $740.0 $795.5
Cost of Sales 506.8 517.4 558.3 598.0
============== ============== ============== ==============
Gross Profit $177.6 $190.5 $181.7 $197.5
EBITDAR (1) 96.2 102.3 101.9 113.2
Rent 38.5 39.8 42.2 44.6
EBITDA (1) $ 57.7 $ 62.5 $ 59.7 $ 68.6
Depreciation & Amortization 27.6 24.4 24.9 28.4
============== ============== ============== ==============
EBIT (1) $ 30.1 $ 38.1 $ 34.8 $ 40.2
Net Interest Expense 30.8 32.9 34.3 35.7
Net Income (2) (2.9) 1.3 0.9 2.3
- ---------------------------------------------------------------------------------------------------------- --------------
EBITDA $ 57.7 $ 62.5 $ 59.7 $ 68.6
Less: Interest Expense (30.8) (32.9) (34.3) (35.7)
Less: Taxes (2.3) (4.6) (0.8) (2.3)
Plus: Deferred Tax Provision (0.9) 0.2 0.4 (0.6)
Plus: (Increase) / Decrease in Net Working Capital (4.3) (2.0) 7.3 (1.8)
-------------- -------------- -------------- --------------
Operating Cash Flow $ 19.3 $ 23.1 $ 32.4 $ 28.3
Less: Capital Expenditures (5.5) (12.0) (25.5) (23.0)
-------------- -------------- -------------- --------------
Free Cash Flow $ 13.8 $ 11.2 $ 6.9 $ 5.3
============== ============== ============== ==============
Note: Financial information derived from unaudited financial statements
Cost of sales excludes rent. RTM fiscal year ending in May.
All numbers exclude discontinued operations, including net income.
Gain (loss) on sale of units that are not part of discontinued operations
are included in the numbers above.
(1) Includes add back of goodwill impairment of $1.1 million in the
twelve-months ended March 6, 2005.
(2) Represents net income from continuing operations.
12
RTM EBITDA RECONCILIATION
EBITDA consists of earnings before interest, taxes and depreciation
and amortization. As compared toinhoperation GAAP measurement, EBITDA represents
net income (loss) less: (1) income from discontinued operations, net of income
taxes, and (2) other income, plus the sum of (3) impairment of other long-lived
assets (4) interest expense, net, (5) provision for income taxes and (6)
depreciation and amortization, excluding amortization of deferred financing
costs. RTM uses EBITDA as an internal measurement of operating performance as
well as assisting investors in the understanding of RTM's performance by using a
measure that is unaffected by changes in capital structure or capital investment
cycles. This term, as defined, may not be comparable to a similarly titled
measure used by other companies and is not a measure of performance or liquidity
presented in accordance with GAAP. EBITDA should not be used as a substitute for
net income, net cash provided by or used in operations or other financial data
prepared in accordance with GAAP. A reconciliation of EBITDA and EBITDAR to net
income (loss) is provided below:
FISCAL YEAR ENDED
--------------------------------------------- TWELVE MONTHS
ENDED
MAY 26, MAY 25, MAY 30, MARCH 6,
($ in millions) 2002 2003 2005 2005
- ---------------------------------------------------------------------- ------------ ------------ ------------
Net income (loss) $ (1.2) $ 3.5 $ 12.2 $ 17.8
Income from discontinued operations, net of income taxes (1.7) (2.2) (11.3) (15.5)
Impairment of other long-lived assets -- -- -- 1.1
Other income (0.1) (0.7) (1.2) (1.2)
Interest expense, net 30.8 32.9 34.3 35.7
Provision for income taxes 2.3 4.6 0.8 2.3
Depreciation and amortization, excluding amortization
of deferred financing costs 27.6 24.4 24.9 28.4
------------ ------------ ------------ ------------
EBITDA $ 57.7 $ 62.5 $ 59.7 $ 68.6
Rent expense 38.5 39.8 42.2 44.6
------------ ------------ ------------ ------------
EBITDAR $ 96.2 $ 102.3 $ 101.9 $ 113.2
============ ============ ============ ============
13
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
The following unaudited pro forma condensed consolidated financial
information for the twelve months ended April 3, 2005 of ARG has been prepared
by adjusting the financial statements of ARG, as derived and condensed as
applicable, from ARG's audited consolidated financial statements and unaudited
consolidated financial statements as furnished on Forms 8-K dated June 28, 2005.
The adjustments to the pro forma financial statements give effect to the
acquisition of RTM and the related refinancing. The adjustments include amounts
added or deducted as the case may be, to remove the effects of unusual items and
to give effect for cost synergies between the two companies, and as such, are
not intended to comply with Regulation S-X: Rule 11-01.
The RTM financial information reflected in this pro forma financial
information represents statements of income for the twelve months ended March 6,
2005. That date and period were used because they are the most comparable period
of RTM's fiscal calendar to that of ARG's fiscal calendar. The combined
financial information of RTM for the twelve months ended March 6, 2005 was
derived from unaudited combined financial statements as furnished on Forms 8-K
dated June 28, 2005.
The allocation of the purchase price of RTM and the effect of the pro
forma adjustments for such allocation are based on preliminary estimates and are
subject to revision and could differ materially from the final purchase price
allocation. The pro forma financial information has been prepared as if the
acquisition of RTM and the refinancing had occurred as of April 4, 2004, the
first day of the twelve months ended April 3, 2005. The pro forma adjustments
are described in the notes to the pro forma financial statements which should be
read in conjunction with those statements. The pro forma financial statements
should also be read in conjunction with ARG's audited financial statements and
ARG's and RTM's unaudited financial statements, as furnished on Forms 8-K dated
June 28, 2005.
The pro forma financial information does not purport to reflect our
actual results of operations had the transactions noted above actually occurred
on April 3, 2005 or of our future results of operations.
14
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL INFORMATION
FOR THE TWELVE MONTHS ENDED
April 3, 2005
HISTORICAL NORMALIZED ADJUSTMENTS
ARG/RTM NORMALIZING COMBINED ARG/RTM FOR THE
(DOLLARS IN MILLIONS) COMBINED ADJUSTMENTS SYNERGIES WITH SYNERGIES RTM TRANSACTION PRO FORMA
- --------------------------------------------------------------------------------------- --------------- -----------
INCOME STATEMENT
Royalties & Franchise and
Related Fees $ 72.3 $ (1.3) $ -- $ 71.0 $ -- $ 71.0
Restaurant Sales 1,005.6 (18.3) -- 987.3 -- 987.3
--------- --------- ------- --------- ------- ---------
Total Revenues 1,077.9 (19.6) -- 1,058.3 -- 1,058.3
Cost of Sales 726.8 (15.5) -- 711.3 (1.1) 710.2
--------- --------- ------- --------- ------- ---------
Gross Profit 351.1 (4.1) -- 347.0 1.1 348.1
EBITDAR 206.1 19.6 9.0 234.7 -- 234.7
Rent 60.6 -- -- 60.6 (1.1) 59.5
EBITDA (1) 145.5 19.6 9.0 174.1 1.1 175.2
Depreciation & Amortization 37.3 -- -- 37.3 4.7 42.0
--------- --------- ------- --------- ------- ---------
EBIT 108.2 19.6 9.0 136.8 (3.6) 133.2
Interest Expense 63.0 -- -- 63.0 (8.0) 54.9
Income from continuing
operations $ 22.7 $ 14.7 $ 5.5 $ 42.9 $ 2.3 $ 45.2
- -----------------------------------------------------------------------------------------------------------------------
Adjusted EBITDA $ 149.8 $ 20.3 $ 9.0 $ 179.1 $ 1.1 $ 180.2
Less: Cash Interest (61.2) -- -- (61.2) 9.6 (51.6)
Less: Cash Taxes (2) (5.4) (5.7) (2.1) (13.3) (0.9) (14.2)
Plus: (Increase) / Decrease
in Net Working Capital (3) 3.1 -- -- 3.1 -- 3.1
--------- --------- ------- --------- ------- ---------
Operating Cash Flow 86.2 14.6 6.9 107.6 9.8 117.5
Less: Capital Expenditures (36.8) -- -- (36.8) -- (36.8)
--------- --------- ------- --------- ------- ---------
Free Cash Flow $ 49.4 $ 14.6 $ 6.9 $ 70.9 $ 9.8 $ 80.7
- -----------------------------------------------------------------------------------------------------------------------
EBITDA, as calculated $ 145.5 $ 19.6 $ 9.0 $ 174.1 $ 1.1 $ 175.2
Triarc Management Fee 4.3 0.7 -- 5.0 -- 5.0
--------- --------- ------- --------- ------- ---------
Adjusted EBITDA $ 149.8 $ 20.3 $ 9.0 $ 179.1 $ 1.1 $ 180.2
========= ========= ======= ========= ======= =========
(1) EBITDA includes the addback of $4.5 million related to the impairment of
long-lived assets.
(2) Estimated cash paid for taxes includes the historical amounts for ARG and
RTM and estimates for the normalizing adjustments, synergies and adjustments
for the RTM Transaction. The estimates were calculated as 38.9% of pre-tax
income.
(3) The impact on working capital is estimated as (5.2%) of the change in net
sales. The change in net sales was determined using the average of ARG'S and
RTM's reported net sales for fiscal 2003 and fiscal 2004 as compared to net
sales on a pro forma basis.
15
PRO FORMA CAPITALIZATION
As Of April 3, 2005
AS OF APRIL 3, 2005
---------------------------------------
($ IN MILLIONS) ARBY'S RTM NET. ADJ. PRO FORMA(7)
- --------------------------------------------------------------------------------
Cash(1) $49.6 $ 10.8 ($53.4) $7.1
- --------------------------------------------------------------------------------
New Revolver -- -- -- --
New Term Loan B -- -- 600.0 600.0
Existing Arby's & RTM Debt(2) 317.0 234.4 (526.2) 25.2
Shareholder Receivables -- (10.3) 10.3 --
Capital Lease and Financing Obligations -- 181.9 (9.0) 172.9
Escrowed Cash -- -- (4.9) (4.9)
- --------------------------------------------------------------------------------
TOTAL ARBY'S DEBT $317.0 $406.0 $70.2 $793.2
AS OF APRIL 3, 2005
---------------------------------------
PRO FORMA CREDIT STATISTICS ARBY'S RTM NET. ADJ. PRO FORMA(7)
- --------------------------------------------------------------------------------
LTM EBITDA(3) $75.1 $68.6 $36.4 $180.2
LTM Interest Expense(4) 25.4 35.5 (9.3) 51.6
LTM Rent Expense(5) 16.0 44.6 (1.1) 59.5
LTM Capital Expenditures 13.8 23.0 -- 36.8
Senior Secured Debt/ EBITDA -- -- -- 4.40x
Lease Adjusted Debt / EBITDAR(6) -- -- -- 5.30x
EBITDA / Interest Expense -- -- -- 3.49x
(EBITDA - Capex) / Interest Expense -- -- -- 2.78x
================================================================================
Note: Assumes transaction closes on April 3, 2005 for presentation purposes
(leverage levels will differ at actual close). Based on estimates and
subject to final purchase accounting adjustments.
(1) Arby's cash before adjustments includes $30.6 million of restricted cash
related to the outstanding securitization, which will be refinanced. Pro
forma debt and cash excludes approximately $4.9 million of escrowed cash
(2) Arby's debt includes approximately $206 million related to the
outstanding securitization, $40 million of inter-company debt owed to
Triarc and $71 million of other third party debt.
(3) Net adjustment column includes approximately $20 million of normalization
adjustments, $9 million of net synergies as well as adjustments related
to excluded assets, purchase accounting and an add-back of the Triarc
management fee.
(4) Pro forma interest expense excludes non-cash interest expense.
(5) Net adjustment column relates to purchase accounting adjustments.
(6) Rents are capitalized at 8x
(7) Pro forma column reflects Adjusted EBITDA and EBITDAR, including
steady-state synergies and excluding the Triarc management fee and
non-recurring expenses.
16
PRO FORMA EBITDA RECONCILIATION
EBITDA consists of earnings before interest, taxes and depreciation
and amortization. As compared to the nnancialGdAP measurement, EBITDA represents
net income less: (1) income from discontinued operations, net of income taxes
and plus or minus (2) interest and other income, net, plus the sum of (3)
interest expense, (4) provision for income taxes and (6) depreciation and
amortization, excluding amortization of deferred financing costs. The Company
uses EBITDA as an internal measurement of operating performance as well as
assisting investors in the understanding of the Company's performance by using a
measure that is unaffected by changes in capital structure or capital investment
cycles. This term, as the Company defines it, may not be comparable to a
similarly titled measure used by other companies and is not a measure of
performance or liquidity presented in accordance with GAAP. EBITDA should not be
used as a substitute for net income, net cash provided by or used in operations
or other financial data prepared in accordance with GAAP. A reconciliation of
EBITDA, Adjusted EBITDA and EBITDAR to net income is provided below:
TWELVE MONTHS
ENDED
($ in millions) APRIL 3, 2005
- --------------------------------------------------------------------------------
Net income $ 61.1
Income from discontinued operations, net of income taxes (15.9)
Interest and other income, net (0.3)
Interest expense 54.9
Provision for income taxes 33.4
Depreciation and amortization, excluding amortization
of deferred financing costs 42.0
-------------
EBITDA $ 175.2
Triarc management fee 5.0
-------------
ADJUSTED EBITDA $ 180.2
=============
EBITDA $ 175.2
Rent expense 59.5
-------------
EBITDAR $ 234.7
=============
17
COMPARISON OF AUV AND GROSS PROFIT MARGIN
AUV (1)
for twelve months
ended (in thousands): RTM SYBRA
--- -----
December 2003 $ 952 $848
December 2004 $1,025 $873
April 2005 $1,043 $900
Gross Profit Margin (2)
for twelve months
ended April 2005 24.8% 21.7%
- --------------
(1) Average unit volume ("AUV") is annual net sales divided by weighted average
number of units (restaurants). Sybra AUVs based on 12 months ended December
2003, December 2004 and April 2005. RTM AUVs based on 12 months ended
November 2003, November 2004 and March 2005. RTM's 12 months ended November
2004 and March 2005 include 53 weeks. Sybra's twelve months ended December
2004 and April 2005 include 53 weeks.
(2) For Sybra, Inc. equivalent to ARG's Restaurant Sales less Cost of Sales
divided by Resturant Sales. For RTM, Gross Profit Margin equals gross
profit divided by revenues.
18
PRO FORMA ARG-OWNED RESTAURANT LOCATIONS BY STATE
NUMBER OF NUMBER OF
STATE RESTAURANTS STATE RESTAURANTS
- -------------- ----------- -------------- -----------
Alabama 61 New Jersey 14
California 1 New York 1
Connecticut 8 Ohio 89
Florida 96 Oregon 25
Georgia 96 Pennsylvania 79
Illinois 5 South Carolina 11
Indiana 80 Tennessee 50
Kentucky 30 Texas 63
Maryland 10 Utah 31
Michigan 109 Virginia 4
Minnesota 69 Washington 24
Mississippi 2 Wisconsin 2
Missouri 2 West Virginia 1
North Carolina 45 Wyoming 1
-----
TOTAL 1,009
19