WEN

Business Context and Reporting Period

This Form 10-Q covers the quarterly period ended July 1, 2007, for Triarc Companies, Inc. (Triarc). The Company operates two primary segments: the Arby's restaurant business and an asset management business (Deerfield & Company LLC). During this period, Triarc executed a major corporate restructuring, including the resignation of its Chairman and CEO, the consolidation of headquarters to Atlanta, and a definitive agreement to sell its asset management segment (Deerfield) to Deerfield Triarc Capital Corp. (the REIT).

Key Financial Metrics

Note: The 2006 operating cash flow was significantly impacted by the consolidation of the highly leveraged Deerfield Opportunities Fund, which was redeemed in September 2006.

Material Changes vs. Prior Period

• Restructuring Charges: Operating loss widened significantly due to a $79.4 million charge for facilities relocation and corporate restructuring in the first half of 2007, compared to $1.6 million in the prior year. This charge primarily covered severance for senior executives and the closure of the New York headquarters.
• Segment Performance: Restaurant segment revenues increased 3% to $586.1 million, driven by net new unit openings, though same-store sales declined 2% due to economic conditions in key regions. Asset management fees increased 7% to $32.7 million.
• Investment Income: Net investment income decreased $10.9 million to $40.8 million, largely due to the deconsolidation of the leveraged Opportunities Fund and lower interest income balances.
• Tax Benefit: The Company recognized a significant tax benefit of $28.6 million (63% effective rate) in the first half of 2007, primarily due to the recognition of a previously unrecognized contingent tax benefit of $12.8 million related to executive compensation settlements.

Guidance, Outlook, and Risks

• Pending Deerfield Sale: The sale of the asset management segment is expected to close in August 2007. Proceeds are expected to be significantly lower than the initial $300 million estimate due to a decline in the REIT's stock price. Triarc expects to retain approximately 15% ownership in the REIT post-closing.
• Corporate Restructuring: Triarc is transitioning to a "pure play" restaurant company. Additional restructuring costs of approximately $10.4 million are expected in the second half of 2007 and early 2008.
• Restaurant Outlook: Management anticipates positive same-store sales growth for the second half of 2007, driven by new product introductions and price increases, offsetting economic headwinds in Michigan and Ohio.
• Liquidity: Working capital is currently negative ($8.1 million deficit) due to the reclassification of $91.8 million in assets to non-current and accrued restructuring liabilities. The Company maintains $93.4 million in available revolver capacity.
• Risks: Key risks include the successful closing of the Deerfield sale, the impact of credit market volatility on remaining investments, and the execution of the corporate transition.

Investor Verification Checklist

• Deerfield Sale Proceeds: Verify the final closing price of the REIT stock and the actual cash/equity consideration received, noting the significant decline from the April 2007 valuation.
• Restructuring Accruals: Confirm the timing and amount of remaining severance payments and the $10.4 million in expected future restructuring costs.
• Restaurant Same-Store Sales: Monitor second-half same-store sales trends to validate management's forecast of growth despite regional economic weakness.
• Debt Covenants: Review compliance with the Credit Agreement covenants, particularly leverage and interest coverage ratios, given the recent restructuring charges.
• Tax Position: Assess the sustainability of the tax benefit recognized and the status of state tax examinations involving proposed adjustments of $6.4 million.