WEN

Business Context and Reporting Period

This Form 10-Q is filed by Triarc Companies, Inc. (the parent company of Arby's) for the quarterly period ended June 29, 2008. The company operates primarily in the restaurant business (Arby's) following the sale of its asset management subsidiary, Deerfield & Company, LLC, in December 2007. As of the filing date, Triarc is in the process of a pending all-stock merger with Wendy's International, Inc., expected to close in the second half of 2008.

Key Financial Metrics

Restaurant Segment Performance: Sales from company-owned restaurants increased 5.1% to $572.9 million, driven by the addition of 88 net restaurants. However, same-store sales decreased 2.7% due to economic softness and competitive pricing. Gross margin declined to 24.3% from 26.6% in the prior year due to higher commodity, labor, and utility costs.

Material Changes vs. Prior Period

• Investment Losses: The net loss increased significantly due to a $68.1 million "other than temporary" impairment loss recorded on the company's investment in Deerfield Capital Corp. (DFR) common stock. This loss was not tax-deductible because the shares were distributed as a dividend to shareholders.
• Restructuring Costs: Facilities relocation and corporate restructuring charges dropped from $79.4 million in the prior year to $0.9 million in the current period, as the corporate restructuring (moving headquarters from New York to Atlanta) was largely completed.
• Asset Management Exit: Revenues and costs associated with the former asset management segment (Deerfield) are no longer present, as the business was sold in late 2007.
• Liquidity: Cash and cash equivalents decreased by approximately $59 million, primarily due to capital expenditures ($40.4 million), dividend payments ($16.1 million), and business acquisitions ($9.5 million).

Guidance, Outlook, and Risks

Outlook: Management anticipates that negative factors affecting same-store sales (economic conditions, high fuel/food costs) will persist through the remainder of 2008. Gross margins are expected to remain lower than 2007 levels due to rising commodity and labor costs, partially offset by selective price increases. The company plans to open approximately 14 new company-owned restaurants and close approximately 7 underperforming units in the second half of 2008.

Pending Merger: The merger with Wendy's is subject to regulatory approvals and shareholder votes. Deferred costs related to the merger totaled $13.4 million as of June 29, 2008.

Risks and Contingencies:

• Legal Proceedings: Two putative class action lawsuits have been filed challenging the merger agreement (one in Ohio, one in New York). While Triarc was removed as a defendant in the Ohio suit, it remains a defendant in the New York suit. An unfavorable ruling could delay or prevent the merger.
• REIT Notes Collectability: The company holds $46.4 million in senior secured notes from DFR. While interest payments have been received timely, the notes' collectability depends on DFR's cash flows, which are impacted by the mortgage market dislocation.
• Debt Covenants: The company is in compliance with its credit agreement covenants but notes non-compliance with reporting requirements under certain lease agreements, though no lessors have asserted default.

Investor Verification Checklist

• Merger Status: Verify the progress of regulatory approvals (FTC/DOJ) and shareholder votes required to close the Wendy's merger.
• Investment Impairment: Confirm the tax implications and future valuation risks of the remaining DFR notes ($46.4 million) and the Equities Account ($90.2 million).
• Liquidity Position: Monitor the working capital deficit ($81.8 million) and the company's ability to fund capital expenditures and dividends without additional financing.
• Same-Store Sales: Track the trend of same-store sales declines in the face of rising commodity costs and competitive pricing pressures.
• Legal Litigation: Follow developments in the New York class action lawsuit regarding the merger agreement.