WEN

Business Context and Reporting Period

This Form 10-Q is filed by Triarc Companies, Inc. (the parent company of Arby's Restaurant Group) for the quarterly period ended March 30, 2008. The filing was submitted on May 9, 2008. Triarc operates primarily in the restaurant business (Arby's) following the sale of its asset management subsidiary, Deerfield & Company, LLC, in December 2007. The company announced a definitive merger agreement with Wendy's International, Inc. on April 24, 2008, pending shareholder and regulatory approval.

Key Financial Metrics

Material Changes vs. Prior Period

• Net Loss: The company reported a net loss of $67.5 million compared to net income of $7.1 million in the prior year. This decline is primarily driven by a non-cash "other than temporary" impairment loss of approximately $67.6 million related to the company's investment in Deerfield Capital Corp. (DFR) common stock.
• Investment Income: Investment income swung from a gain of $23.1 million in Q1 2007 to a loss of $65.9 million in Q1 2008 due to the DFR impairment and reduced realized gains on securities.
• Revenue Composition: Asset management fees ($15.9 million in Q1 2007) are no longer present following the Deerfield sale. Restaurant sales increased 5.7% to $281.6 million, driven by the acquisition of 41 restaurants in California, partially offset by a 1.6% decline in same-store sales for company-owned units.
• Cost of Sales: Gross margin decreased to 24.4% from 26.8% due to higher commodity costs (beef), fuel costs, and minimum wage increases.
• General and Administrative Expenses: Decreased 22.0% to $44.9 million, largely due to the completion of the corporate restructuring (moving headquarters to Atlanta) and the elimination of asset management overhead.

Guidance, Outlook, and Risks

• Merger with Wendy's: Triarc signed an agreement to acquire Wendy's in an all-stock transaction (4.25 Triarc shares for 1 Wendy's share). The deal is expected to close in the second half of 2008 but is subject to regulatory and shareholder approvals. A class-action lawsuit challenging the merger was filed on April 25, 2008.
• DFR Investment Risk: The company holds $46.3 million in senior secured notes from DFR. While the principal is believed to be fully collectible, DFR's cash flows are impacted by the credit crisis in the mortgage sector. The company distributed its DFR common stock to shareholders as a dividend in April 2008.
• Operational Outlook: Management anticipates continued pressure on same-store sales due to the economic environment and high fuel/food costs. They plan to open approximately 40 new company-owned restaurants in the remainder of 2008 and increase national advertising.
• Liquidity: The company has a working capital deficit of $57.2 million. It expects to meet cash requirements through operating cash flows, a $100 million revolving credit facility (with $92.5 million available), and a $30 million conditional sale-leaseback commitment.
• Restructuring: Corporate restructuring charges of $0.9 million were incurred in Q1 2008. Management does not expect additional charges for the remainder of the year.

Investor Verification Checklist

• DFR Note Collectibility: Verify the status of the $46.3 million in Deerfield Capital Corp. notes receivable given the REIT's exposure to the mortgage market.
• Merger Approval: Monitor the progress of shareholder votes and regulatory approvals for the Wendy's merger, including the impact of the pending class-action lawsuit.
• Same-Store Sales Trends: Track the recovery of same-store sales for company-owned Arby's restaurants amidst high commodity costs and economic softness.
• Debt Covenants: Confirm continued compliance with leverage and interest coverage ratios under the Credit Agreement, particularly given the recent net loss.
• Capital Expenditures: Review the execution of the planned $40.3 million in capital expenditures for the remainder of 2008.