Edgar Filing: TRIARC COMPANIES INC

form10q_080508.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(X)	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 29, 2008

( )	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______________ to _______________

Commission file number: 1-2207

TRIARC COMPANIES, INC.

(Exact name of registrant as specified in its charter)

Delaware		38-0471180
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)


1155 Perimeter Center West, Atlanta, GA		30338
(Address of principal executive offices)		(Zip Code)

(678) 514-4100

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year,

if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes [X] No [ ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

Large accelerated filer [X] Accelerated filer [ ] Non-accelerated filer [ ] Smaller reporting company [ ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes [ ] No [X]

There were 28,952,771 shares of the registrant’s Class A Common Stock and 64,081,445 shares of the registrant’s Class B Common Stock outstanding as of July 31, 2008.

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

TRIARC COMPANIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

	December 30,			June 29,
		2007(A)		2008
				(Unaudited)
	(In Thousands)
ASSETS

Current assets:
Cash and cash equivalents	$	78,116		$	19,093
Short-term investments		2,608			2,349
Accounts and notes receivable		27,610			27,892
Inventories		11,067			10,694
Deferred income tax benefit		24,921			20,487
Prepaid expenses and other current assets		25,932			17,569
Total current assets		170,254			98,084
Restricted cash equivalents		45,295			4,075
Notes receivable from related party		46,219			46,397
Investments		141,909			101,853
Properties		504,874			528,194
Goodwill		468,778			477,299
Other intangible assets		45,318			49,587
Deferred income tax benefit		4,050			21,703
Deferred costs and other assets		27,870			28,743
	$	1,454,567		$	1,355,935

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:
Current portion of long-term debt	$	27,802		$	15,355
Accounts payable		54,297			48,225
Accrued expenses and other current liabilities		117,785			109,069
Current liabilities related to discontinued operations		7,279			7,260
Total current liabilities		207,163			179,909
Long-term debt		711,531			729,955
Deferred income		10,861			18,168
Other liabilities		75,180			78,000
Minority interests in consolidated subsidiaries		958			229
Stockholders’ equity:
Class A common stock		2,955			2,955
Class B common stock		6,402			6,410
Additional paid-in capital		291,122			290,199
Retained earnings		167,267			62,305
Common stock held in treasury		(16,774	)		(13,236	)
Accumulated other comprehensive income (loss)		(2,098	)		1,041
Total stockholders’ equity		448,874			349,674
	$	1,454,567		$	1,355,935

(A) Derived from the audited consolidated financial statements as of December 30, 2007.

See accompanying notes to condensed consolidated financial statements.

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TRIARC COMPANIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

	Three Months Ended						Six Months Ended
	July 1,			June 29,			July 1,			June 29,
	2007			2008			2007			2008
	(In Thousands Except Per Share Amounts)
	(Unaudited)
Revenues:
Sales	$	278,572		$	291,340		$	545,070		$	572,919
Franchise revenues		21,408			21,674			41,078			42,949
Asset management and related fees		16,841			-			32,719			-
		316,821			313,014			618,867			615,868
Costs and expenses:
Cost of sales		204,887			220,527			399,859			433,437
Cost of services		6,308			-			13,198			-
Advertising		20,658			24,465			38,387			45,000
General and administrative		55,975			42,122			113,558			87,033
Depreciation and amortization		18,404			17,693			34,389			33,686
Facilities relocation and corporate restructuring		79,044			(41	)		79,447			894
Settlement of preexisting business relationships		-			-			-			(487	)
		385,276			304,766			678,838			599,563
Operating (loss) profit		(68,455	)		8,248			(59,971	)		16,305
Interest expense		(15,286	)		(13,944	)		(30,675	)		(27,435	)
Investment income (loss), net		17,625			(9,199	)		40,773			(75,121	)
Other income (expense), net		3,158			1,224			4,765			(3,341	)
Loss from continuing operations before benefit from income taxes and minority interests		(62,958	)		(13,671	)		(45,108	)		(89,592	)
Benefit from income taxes		36,002			6,766			28,559			15,230
Minority interests in income of consolidated subsidiaries		(1,067	)		-			(4,264	)		(14	)
Loss from continuing operations		(28,023	)		(6,905	)		(20,813	)		(74,376	)
Loss from disposal of discontinued operations, net of income tax benefit		-			-			(149	)		-
Net loss	$	(28,023	)	$	(6,905	)	$	(20,962	)	$	(74,376	)

Basic and diluted loss from continuing operations and net loss per share:
Class A and Class B common stock	$	(.30	)	$	(.07	)	$	(.23	)	$	(.80	)

See accompanying notes to condensed consolidated financial statements.

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TRIARC COMPANIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

	Six Months Ended
	July 1,			June 29,
	2007			2008
	(In Thousands)
	(Unaudited)
Cash flows from continuing operating activities:
Net loss	$	(20,962	)	$	(74,376	)
Adjustments to reconcile net loss to net cash provided by continuing operating activities:
Operating investment adjustments, net (see below)		(29,112	)		75,858
Depreciation and amortization		34,389			33,686
Receipt of deferred vendor incentive, net of amount recognized		5,886			7,295
Write-off of deferred financing costs		-			5,111
Share-based compensation provision		6,869			2,763
Straight-line rent accrual		3,388			2,318
Amortization of deferred financing costs		977			1,209
Equity in undistributed (earnings) losses of investees		(1,159	)		754
Minority interests in income of consolidated subsidiaries		4,264			14
Deferred income tax benefit		(28,759	)		(15,315	)
Facilities relocation and corporate restructuring, net provision (payments)		78,914			(4,082	)
Unfavorable lease liability recognized		(2,241	)		(2,290	)
Payment of withholding taxes related to share-based compensation		(4,752	)		(177	)
Deferred compensation		2,516			-
Loss from discontinued operations		149			-
Other, net		(842	)		(484	)
Changes in operating assets and liabilities:
Accounts and notes receivable		16,514			(1,802	)
Inventories		476			787
Prepaid expenses and other current assets		410			9,154
Accounts payable, accrued expenses and other current liabilities		(39,375	)		(17,456	)
Net cash provided by continuing operating activities		27,550			22,967
Cash flows from continuing investing activities:
Capital expenditures		(34,154	)		(40,443	)
Cost of business acquisitions, less cash acquired		(1,254	)		(9,537	)
Cost of proposed business acquisition		-			(5,443	)
Investment activities, net (see below)		18,849			155
Other, net		(93	)		(88	)
Net cash used in continuing investing activities		(16,652	)		(55,356	)
Cash flows from continuing financing activities:
Proceeds from issuance of long-term debt		10,047			19,622
Repayments of notes payable and long-term debt		(11,145	)		(29,394	)
Dividends paid		(16,119	)		(16,101	)
Net distributions to minority interests		(7,378	)		(742	)
Proceeds from exercises of stock options		1,371			-
Deferred financing costs		(1,164	)		-
Net cash used in continuing financing activities		(24,388	)		(26,615	)
Net cash used in continuing operations		(13,490	)		(59,004	)
Net cash used in operating activities of discontinued operations		(119	)		(19	)
Net decrease in cash and cash equivalents		(13,609	)		(59,023	)
Cash and cash equivalents at beginning of period		148,152			78,116
Cash and cash equivalents at end of period	$	134,543		$	19,093

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TRIARC COMPANIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

	Six Months Ended
	July 1,			June 29,
	2007			2008
	(In Thousands)
	(Unaudited)
Detail of cash flows related to investments:
Operating investment adjustments, net:
Other than temporary losses (a)	$	2,367		$	71,586
Net recognized (gains) losses from trading securities and derivatives and securities sold short		(9,292	)		4,845
Other net recognized losses		(28,425	)		(573	)
Proceeds from sales of trading securities		6,019			-
Other		219			-
	$	(29,112	)	$	75,858
Investing investment activities, net:
Cost of available-for-sale securities and other investments purchased	$	(64,471	)	$	(54,847	)
(Increase) decrease in restricted cash collateralizing securities obligations or held for investment		(30,577	)		41,220
Proceeds from sales of available-for-sale securities and other investments		113,897			13,782
	$	18,849		$	155
Supplemental disclosures of cash flow information:
Cash paid during the period in continuing operations for:
Interest	$	27,733		$	26,007
Income taxes, net of refunds	$	3,322		$	2,337
Supplemental schedule of non-cash investing and financing activities:
Total capital expenditures	$	44,135		$	46,483
Capital expenditures paid in cash		(34,154	)		(40,443	)
Non-cash capitalized lease and certain sales-leaseback obligations	$	9,981		$	6,040

Non-cash additions to long-term debt	$	2,037		$	9,574

(a) The 2008 amount relates to our investment in Deerfield Capital Corp. common stock ($68,086) as described in Note 3 and our investment in Jurlique International Pty Ltd. ($3,500) as described in Note 10.

See accompanying notes to condensed consolidated financial statements.

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TRIARC COMPANIES, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

June 29, 2008

(In Thousands Except Share Data)

(Unaudited)

(1)	Basis of Presentation

The accompanying unaudited condensed consolidated financial statements (the “Financial Statements”) of Triarc Companies, Inc. (“Triarc” and, together with its subsidiaries, “We”) have been prepared in accordance with Rule 10-01 of Regulation S-X promulgated by the Securities and Exchange Commission (the “SEC”) and, therefore, do not include all information and footnotes necessary for a fair presentation of financial position, results of operations and cash flows in conformity with accounting principles generally accepted in the United States of America (“GAAP”). In our opinion, however, the Financial Statements contain all adjustments, consisting only of normal recurring adjustments, necessary to present fairly our financial position as of the six-month period and results of operations for the three-month and six-month periods and our cash flows for the six-month periods, set forth in the following paragraph. The results of operations for the six-month period ended June 29, 2008 will not be indicative of the results to be expected for the full 2008 fiscal year due, in part, to the effect in the six months ended June 29, 2008 of the other than temporary losses related to our investment in Deerfield Capital Corp. (“DFR” or the “REIT”) as described in Note 3. These Financial Statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended December 30, 2007 (the “Form 10-K”).

We report on a fiscal year consisting of 52 or 53 weeks ending on the Sunday closest to December 31. Our second quarter of fiscal 2007 commenced on April 2, 2007 and ended on July 1, 2007 (the “three months ended July 1, 2007” or the “2007 second quarter”). Our second quarter of fiscal 2008 commenced on March 31, 2008 and ended on June 29, 2008 (the “three months ended June 29, 2008” or the “2008 second quarter”). Our first half of fiscal 2007 commenced on January 1, 2007 and ended on July 1, 2007 (the “six months ended July 1, 2007” or the “2007 first half”). Our first half of fiscal 2008 commenced on December 31, 2007 and ended on June 29, 2008 (the “six months ended June 29, 2008” or the “2008 first half”). Each quarter contained 13 weeks and each half contained 26 weeks. Our 2007 second quarter and first half included the calendar basis reported results of Deerfield & Company, LLC (“Deerfield”), our former subsidiary which was sold (the “Deerfield Sale”) on December 21, 2007 (see Note 3). This difference in reporting basis is not material to our condensed consolidated financials statements. With the exception of Deerfield, all references to years, halves and quarters relate to fiscal periods rather than calendar periods.

(2)	Pending Merger with Wendy’s International, Inc.

On April 23, 2008, we entered into a definitive merger agreement (the “Merger Agreement”) with Wendy’s International, Inc. (“Wendy’s”) for an all stock transaction in which Wendy’s shareholders would receive a fixed ratio of 4.25 shares of our Class A Common Stock for each share of Wendy’s common stock they own and in which Wendy’s would become a wholly-owned subsidiary of Triarc. Wendy’s stock options and other equity awards will generally convert upon completion of the merger into stock options and equity awards with respect to our Class A Common Stock, after giving effect to the exchange ratio. Under the agreement, our stockholders will be asked to approve the conversion of each share of our Class B Common Stock, Series 1, into one share of our Class A Common Stock, resulting in a post-merger company with a single class of common stock (“Wendy’s/Arby’s Common Stock”). Existing shares of Triarc Class A Common Stock will remain outstanding as shares of Wendy’s/Arby’s Common Stock. Wendy’s/Arby’s Common Stock is expected to be quoted on the New York Stock Exchange under the symbol “WEN.”

In the merger, approximately 377,000,000 shares of Wendy’s/Arby’s Common Stock will be issued to Wendy’s shareholders. Based on the number of outstanding shares of Triarc Class A and Triarc Class B Common Stock, and the number of outstanding Wendy’s common shares, Wendy’s shareholders would hold approximately 81%, in the aggregate, of the outstanding Wendy’s/Arby’s Common Stock following completion of the merger.

The transaction is subject to regulatory approvals, customary closing conditions and the approval of both Wendy’s shareholders and our stockholders. The transaction is expected to close in the second half of 2008. As of June 29, 2008 our deferred costs related to the merger were $13,362 and are included in “Deferred costs and other assets” on the accompanying condensed consolidated balance sheet. There can be no assurance that shareholder, stockholder and other approvals will be obtained or that the merger will be consummated.

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(3) Deerfield Sale and Related Transactions

Deerfield Sale

As described in Note 3 to our consolidated financial statements contained in our Form 10-K, on December 21, 2007, we completed the sale of our majority capital interest in Deerfield, our former asset management business, to the REIT, resulting in non-cash proceeds aggregating $134,608 consisting of 9,629,368 shares of convertible preferred stock of the REIT with a then estimated fair value of $88,398 and $47,986 principal amount of series A senior secured notes of a subsidiary of the REIT due in December 2012 (the “REIT Notes”) with a then estimated fair value of $46,210. We also retained ownership of 205,642 common shares in the REIT as part of a pro rata distribution to the members of Deerfield prior to the Deerfield Sale. The Deerfield Sale resulted in a pretax gain of approximately $40,193 which was recorded in the fourth quarter of 2007.

The REIT Notes bear interest at the three-month London InterBank Offered Rate (“LIBOR”) (2.69% at June 29, 2008) plus 5% through December 31, 2009, increasing 0.5% each quarter from January 1, 2010 through June 30, 2011 and 0.25% each quarter from July 1, 2011 through their maturity. The REIT Notes are secured by certain equity interests of the REIT and certain of its subsidiaries. The $1,776 original imputed discount on the REIT Notes is being accreted to “Other income (expense), net” in the accompanying condensed consolidated statement of operations using the interest rate method. The REIT Notes, net of unamortized discount, are reflected as “Notes receivable from related party” in the accompanying condensed consolidated balance sheets.

During July 2008, $5,899 of expenses related to the Deerfield Sale were substantially paid by the REIT as previously agreed. Such expenses are included as a liability of the Company, as the representative of the sellers, with an equal offsetting receivable from the REIT as of June 29, 2008.

Other than Temporary Losses and Equity in Losses of the REIT

On March 18, 2008, in response to unanticipated credit and liquidity events in 2008, the REIT announced that it was repositioning its investment portfolio to focus on agency-only residential mortgage-backed securities and away from its principal investing segment to its asset management segment with its fee-based revenue streams. In addition, it stated that during the first quarter of 2008, its portfolio was adversely impacted by further deterioration of the global credit markets and, as a result, it sold $2,800,000 of its agency and $1,300,000 of its AAA-rated non-agency mortgage-backed securities and reduced the net notional amount of interest rate swaps used to hedge a portion of its mortgage-backed securities by $4,200,000, all at a net after-tax loss of $294,300 to the REIT.

Based on the events described above and their negative effect on the market price of the REIT common stock, we concluded that the fair value and, therefore, the carrying value of our investment in the 9,629,368 common shares, which were received upon the conversion of the convertible preferred stock as of March 11, 2008 (as described below), as well as the 205,642 common shares which were distributed to us in connection with the Deerfield Sale, were impaired. As a result, as of March 11, 2008, we recorded an other than temporary loss which is included in “Investment income (loss), net,” in the accompanying condensed consolidated statement of operations for the six months ended June 29, 2008 of $67,594 (without tax benefit as described below) which includes $11,074 of pre-tax unrealized holding losses previously recorded as of December 30, 2007 and included in “Accumulated other comprehensive income (loss)”, a component of stockholder’s equity in the accompanying condensed consolidated balance sheets. These common shares were considered available-for-sale securities due to the limited period they were to be held as of March 11, 2008 (the “Determination Date”) before the dividend distribution of the shares to our stockholders on April 4, 2008 (as described below).

Additionally, from December 31, 2007 through the Determination Date, we recorded approximately $754 of equity in net losses of the REIT which are included in “Other income (expense), net” in the accompanying condensed consolidated statement of operations for the six months ended June 29, 2008 related to our investment in the 205,642 common shares of the REIT discussed above which were accounted for on the equity method through the Determination Date.

The dislocation in the mortgage sector and current weakness in the broader financial market has adversely impacted, and may continue to adversely impact, the REIT’s cash flows. Nonetheless, we received both quarterly interest payments on the REIT Notes which were due through June 30, 2008 on a timely basis. As of June 29, 2008, based on information available to us, we believe the principal amount of the REIT Notes is fully collectible.

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Conversion of Convertible Preferred Stock and Dividend of REIT Common Stock

On March 11, 2008, DFR stockholders approved the one-for-one conversion of all its outstanding convertible preferred stock into DFR common stock which converted the 9,629,368 preferred shares we held into a like number of shares of common stock. On March 11, 2008, our Board of Directors approved the distribution of our 9,835,010 shares of DFR common stock, which also included the 205,642 common shares of the REIT discussed above, to our stockholders. The dividend, which was valued at $14,464, was paid on April 4, 2008 to holders of record of our class A common stock (the “Class A Common Stock”) and our class B common stock (the “Class B Common Stock”) on March 29, 2008 (the “Record Date”). We also recorded an additional impairment charge from March 11, 2008 through the Record Date of $492. As a result of the dividend, the income tax loss that resulted from the decline in value of our investment of $68,086 is not deductible for income tax purposes and no income tax benefit was recorded related to this loss.

(4)	Business Acquisitions

Acquisitions

We completed the acquisitions of the operating assets, net of liabilities assumed, of 45 franchised restaurants, including 41 restaurants in the California market, in two separate transactions during the six months ended June 29, 2008. The total consideration, before post-closing adjustments, for the acquisitions was $15,807 consisting of (1) $8,890 of cash (before consideration of $45 of cash acquired), (2) the assumption of $6,239 of debt and (3) $678 of related expenses. The aggregate purchase price of $16,294 also included $693 of losses from the settlement of unfavorable franchise rights and a $1,180 gain on the termination of subleases both included in “Settlement of preexisting business relationships” in the accompanying condensed consolidated statement of operations. Further, we paid an additional $14 in 2008 for a finalized post-closing purchase price adjustment related to other restaurant acquisitions in 2007. The impact of these acquisitions on our results of operations for the three and six months ended June 29, 2008 was not material. Therefore, no pro forma information has been included herein.

We completed the acquisitions of the operating assets, net of liabilities assumed, of 6 franchised restaurants during the six months ended July 1, 2007. The total consideration, before post-closing adjustments, for the acquisitions was $1,944 consisting of (1) $1,171 of cash (before consideration of $5 of cash acquired), (2) the assumption of $700 of debt and (3) $73 of related expenses. Further, we paid an additional $10 in the six months ended July 1, 2007 for a finalized post-closing purchase price adjustment related to other restaurant acquisitions in 2006.

(5)	Other Comprehensive Loss

The following is a summary of the components of “Other comprehensive loss”, net of income taxes and minority interests:

	Three Months Ended						Six Months Ended
	July 1,			June 29,			July 1,			June 29,
	2007			2008			2007			2008

Net loss	$	(28,023	)	$	(6,905	)	$	(20,962	)	$	(74,376	)
Net unrealized gains (losses) on available-for-sale securities (a)		1,936			(760	)		(7,067	)		3,676
Net unrealized gains (losses) on cash flow hedges (b)		1,062			721			134			(431	)
Net change in currency translation adjustment		223			46			270			(106	)
Other comprehensive loss	$	(24,082	)	$	(6,898	)	$	(27,625	)	$	(71,237	)

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(a) Net unrealized gains (losses) on available-for-sale securities:
	Three Months Ended						Six Months Ended
	July 1,			June 29,			July 1,			June 29,
	2007			2008			2007			2008

Unrealized holding gains (losses) arising during the period	$	4,560		$	(1,192	)	$	6,034		$	(5,112	)
Reclassifications of prior period unrealized holding (gains) losses into net income or loss		(690	)		-			(16,606	)		11,074
Unrealized holding gain arising from the reclassification of an investment previously accounted for under the equity method to an available-for-sale investment		550			-			550			-
Change in unrealized holding gains and losses arising during the period from investments under the equity method of accounting		(1,479	)		-			(1,122	)		(201	)
		2,941			(1,192	)		(11,144	)		5,761
Income tax (provision) benefit		(1,069	)		432			3,999			(2,085	)
Minority interests in change in unrealized holding gains and losses of a consolidated subsidiary		64			-			78			-
	$	1,936		$	(760	)	$	(7,067	)	$	3,676

(b) Net unrealized gains (losses) on cash flow hedges:
	Three Months Ended						Six Months Ended
	July 1,			June 29,			July 1,			June 29,
	2007			2008			2007			2008

Unrealized holding gains (losses) arising during the period	$	981		$	399		$	798		$	(1,517	)
Reclassifications of prior period unrealized holding (gains) losses into net income or loss		(512	)		781			(1,033	)		809
Change in unrealized holding gains and losses arising during the period from investments under the equity method of accounting		1,213			-			434			3
		1,682			1,180			199			(705	)
Income tax (provision) benefit		(620	)		(459	)		(65	)		274
	$	1,062		$	721		$	134		$	(431	)

(6)	Loss Per Share

Basic loss per share has been computed by dividing the allocated loss for our Class A Common Stock and our Class B Common Stock by the weighted average number of shares of each class. Both factors are presented in the tables below. Net loss was allocated equally among each share of Class A Common Stock and Class B Common Stock, resulting in the same loss per share for each class.

Diluted loss per share for each of the three-month and six-month periods ended July 1, 2007 and June 29, 2008 was the same as basic loss per share for each share of the Class A Common Stock and Class B Common Stock since we reported losses from continuing operations. Therefore, the effect of all potentially dilutive securities on the loss from continuing operations per share would have been antidilutive. The loss per share from discontinued operations for the six-month period ended July 1, 2007 was less than $.01 and, therefore, is not presented on the condensed consolidated statements of operations.

Our securities as of June 29, 2008 that could have a dilutive effect on any future basic income per share calculations for periods subsequent to June 29, 2008 are (1) outstanding stock options which can be exercised into 755,000 shares and 5,348,000 shares of our Class A Common Stock and Class B Common Stock, respectively, (2) 48,000 and 353,000 non-vested restricted shares of our Class A Common Stock and Class B Common Stock, respectively, which principally vest over three years and (3) $2,100 of Convertible Notes which are convertible into 53,000 shares and 107,000 shares of our

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Class A Common Stock and Class B Common Stock, respectively, as adjusted due to the dividend of the REIT common stock to our stockholders paid on April 4, 2008.

Loss per share has been computed by allocating the loss as follows:

	Three Months Ended						Six Months Ended
	July 1,			June 29,			July 1,			June 29,
	2007			2008			2007			2008
Class A Common Stock:
Continuing operations	$	(8,749	)	$	(2,155	)	$	(6,500	)	$	(23,212	)
Discontinued operations		-			-			(47	)		-
Net loss	$	(8,749	)	$	(2,155	)	$	(6,547	)	$	(23,212	)

Class B Common Stock:
Continuing operations	$	(19,274	)	$	(4,750	)	$	(14,313	)	$	(51,164	)
Discontinued operations		-			-			(102	)		-
Net loss	$	(19,274	)	$	(4,750	)	$	(14,415	)	$	(51,164	)

The number of shares used to calculate basic and diluted loss per share for the three months ended July 1, 2007 and June 29, 2008 was 28,821 and 28,903 for Class A Common Stock and 63,490 and 63,721 for Class B Common Stock, respectively. The number of shares used to calculate basic loss per share for the six months ended July 1, 2007 and June 29, 2008 was 28,790 and 28,902 for Class A Common Stock and 63,389 and 63,707 for Class B Common Stock, respectively.

(7)	Facilities Relocation and Corporate Restructuring

The facilities relocation charges incurred and recognized in our restaurant business for the six-month periods ended July 1, 2007 and June 29, 2008 of $254 and $127, respectively, principally related to changes in the estimated carrying costs for real estate we purchased under terms of employee relocation agreements entered into as part of our acquisition of the RTM Restaurant Group (“RTM”), in July 2005 (the “RTM Acquisition”). We do not currently expect to incur additional facilities relocation charges with respect to the RTM Acquisition.

The general corporate charges for the six months ended July 1, 2007 and June 29, 2008 of $79,193 and $767, respectively, principally relate to the transfer of substantially all of Triarc’s senior executive responsibilities to the Arby’s Restaurant Group, Inc. (“ARG”), a wholly-owned subsidiary of ours, executive team in Atlanta, Georgia (the “Corporate Restructuring”) as further described in Notes 18 and 28 to the consolidated financial statements contained in our Form 10-K. In April 2007, we announced that we would be closing our New York headquarters and combining our corporate operations with our restaurant operations in Atlanta, Georgia. This transfer of responsibilities was completed in early 2008. Accordingly, to facilitate this transition, we entered into contractual settlements (the “Contractual Settlements”) with our Chairman and then Chief Executive Officer and our Vice Chairman and then President and Chief Operating Officer (the “Former Executives”) evidencing the termination of their employment agreements and providing for their resignation as executive officers effective June 29, 2007. The effect of severance arrangements entered into with other New York headquarters’ executives and employees were recorded based on their terms. In addition, we sold properties and other assets at our former New York headquarters in 2007 to an affiliate of the Former Executives. The additional provision in the first quarter of 2008 related to current period charges for the transition severance arrangements of the other New York headquarters’ employees who continued to provide services as employees during the 2008 first quarter. We do not currently expect to incur additional charges with respect to the Corporate Restructuring.

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The components of the facilities relocation and corporate restructuring charges and an analysis of activity in the facilities relocation and corporate restructuring accrual during the six-month periods ended July 1, 2007 and June 29, 2008 are as follows:

	Six Months Ended
	July 1, 2007

	Balance							Balance
	December 31,							July 1,
	2006		Provision		Payments			2007
Restaurant Business:
Cash obligations:
Employee relocation costs	$	134	$	254	$	(47	)	$	341
Other		687		-		(486	)		201
Total restaurant business		821		254		(533	)		542
General Corporate:
Cash obligations:
Severance and retention incentive compensation		-		79,193		-			79,193
Total general corporate		-		79,193		-			79,193
	$	821	$	79,447	$	(533	)	$	79,735

	Six Months Ended
	June 29, 2008
										Total
										Expected
	Balance							Balance		and
	December 30,							June 29,		Incurred
	2007		Provision		Payments			2008		to Date
Restaurant Business:
Cash obligations:
Employee relocation costs	$	591		127		(639	)		79	$	4,658
Other		-		-		-			-		7,471
		591		127		(639	)		79		12,129
Non-cash charges		-		-		-			-		719
Total restaurant business		591		127		(639	)		79		12,848
General Corporate:
Cash obligations:
Severance and retention incentive compensation		12,208		767		(4,337	)		8,638		84,697
Non-cash charges		-		-		-			-		835
Total general corporate		12,208		767		(4,337	)		8,638		85,532
	$	12,799		894		(4,976	)		8,717	$	98,380

(8)	Fair Value Measurements

In September 2006, the Financial Accounting Standards Board (the “FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 157, as amended, “Fair Value Measurements,” (“SFAS 157”). SFAS 157 addresses issues relating to the definition of fair value, the methods used to measure fair value and expanded disclosures about fair value measurements. SFAS 157 does not require any new fair value measurements. The definition of fair value in SFAS 157 focuses on the price that would be received to sell an asset or paid to transfer a liability, not the price that would be paid to acquire an asset or received to assume a liability. The methods used to measure fair value should be based on the assumptions that market participants would use in pricing an asset or a liability. SFAS 157 expands disclosures about the use of fair value to measure assets and liabilities in interim and annual periods subsequent to adoption. FASB Staff Position (“FSP”) No. FAS 157-1, “Application of FASB Statement No. 157 to FASB Statement No. 13 and Other Accounting Pronouncements that Address Fair Value Measurements for Purposes of Lease Classification or Measurement under Statement 13” (“FSP FAS 157-1”), states that SFAS 157 does not apply under SFAS No. 13, “Accounting for Leases” (“SFAS 13”), and other accounting pronouncements that address fair value measurements for purposes of lease classification or measurement under SFAS 13. In addition, FSP No. FAS 157-2, “Effective Date of FASB Statement No. 157” (“FSP FAS 157-2”), defers the application of SFAS 157 to nonfinancial assets and nonfinancial liabilities until our 2009 fiscal year, except for items recognized or disclosed on a recurring basis, at least annually. SFAS 157 was, with some limited exceptions, applied prospectively and was effective commencing with our first fiscal quarter of 2008, with the exception of the areas mentioned above under which exemptions to or deferrals of the application of certain aspects of SFAS 157 apply. Our adoption of SFAS 157 in the first quarter of 2008 did not result in any change in the methods we use to measure the fair value of those financial assets and liabilities. We are presenting the expanded fair value disclosures of SFAS 157.

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SFAS 157’s valuation techniques are based on observable and unobservable inputs. Observable inputs reflect readily obtainable data from independent sources, while unobservable inputs reflect our market assumptions. SFAS 157 classifies these inputs into the following hierarchy:

Level 1 Inputs—Quoted prices for identical assets or liabilities in active markets.

Level 2 Inputs—Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.

Level 3 Inputs— Pricing inputs are unobservable for the assets and liabilities and include situations where there is little, if any, market activity for the asset and liabilities. The inputs into the determination of fair value require significant management judgment or estimation.

Our financial assets and liabilities as of June 29, 2008 include available-for-sale investments, investment derivatives, the REIT Notes and various investments in liability positions. The available-for-sale securities, investment derivatives, and various investments in liability positions include those managed (the “Equities Account”) by a management company formed by the Former Executives and a director (the “Management Company”) We determine fair value of our available-for-sale securities and investment derivatives principally using quoted market prices, broker/dealer prices or statements of account received from investment managers, which were principally based on quoted market or broker/dealer prices. We determined a fair value of the REIT Notes based on the present value at current market rates of the average of expected cash flows as of June 29, 2008. We determine fair value of our interest rate swaps using quotes provided by the respective bank counterparties that are based on models whose inputs are observable LIBOR forward interest rate curves.

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The fair values of our financial assets or liabilities and the hierarchy of the level of inputs are summarized below:

	June 29,		Fair Value Measurements at June 29, 2008 Using
	2008		Level 1		Level 2		Level 3

Assets
Interest rate swap in an asset position (included in “Prepaid expenses and other current assets”)	$	8	$	-	$	8	$	-
Available-for-sale securities:
Equities Account – restricted (a)		87,410		87,410		-		-
Short-term investments		2,349		2,349		-		-
Investment derivatives in the Equities Account:
Put option on market index-restricted (a)		3,828		3,828		-		-
REIT Notes		42,624		-		-		42,624
Total assets	$	136,219	$	93,587	$	8	$	42,624

Liabilities
Interest rate swaps in a liability position (included in “Accrued expenses and other current liabilities”)	$	960	$	-	$	960	$	-
Security sold with an obligation to purchase-restricted (b)		749		749		-		-
Investment derivatives in the Equities Account:
Put and call option combinations on equity securities-restricted (b)		1,353		1,353		-		-
Total return swap on an equity security-restricted (b)		1,822		1,822		-		-
Put option on an equity security sold with an obligation to purchase-restricted (b)		103		103		-		-
Total liabilities	$	4,987	$	4,027	$	960	$	-

(a)	Included in “Investments” on the accompanying condensed consolidated balance sheet as of June 29, 2008. Investments also include $10,615 of cost basis investments.

(b)	Included in “Other liabilities” on the accompanying condensed consolidated balance sheet.

The table below provides a reconciliation of all assets measured at fair value on a recurring basis which use level three or significant unobservable inputs for the period from December 30, 2007 to June 29, 2008.


	REIT Notes

Fair value at December 30, 2007	$	46,219
Accretion of original imputed discount included in “Other income (expense), net”		178
Reduction in fair value of notes		(3,773	)
Fair value at June 29, 2008	$	42,624

The REIT Notes with a carrying value of $46,397 are reflected as “Notes receivable from related party” on the accompanying condensed consolidated balance sheet as of June 29, 2008.

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(9) Impairment of Long-Lived Assets

The following is a summary of our impairment losses for our restaurants and in our former asset management segment:

	Three Months Ended				Six Months Ended
	July 1,		June 29,		July 1,		June 29,
	2007		2008		2007		2008

Restaurants, primarily properties	$	647	$	1,338	$	807	$	1,417
Asset management segment		1,109		-		1,109		-
	$	1,756	$	1,338	$	1,916	$	1,417

The restaurant impairment losses reflected (1) impairment charges resulting from the deterioration in operating performance of certain restaurants and (2) additional charges for investments in restaurants impaired in a prior year which did not subsequently recover.

(10) Other than temporary loss in investment in Jurlique International Pty Ltd.

As described in Note 8 to our consolidated financial statements contained in our Form 10-K, we have a cost investment in Jurlique International Pty Ltd. (“Jurlique”), an Australian skin and beauty products company that is not publicly traded. Based on an evaluation of our investment we determined that its value had declined and that the decline was other than temporary. Therefore we recorded an other than temporary loss, which is included in “Investment income (loss), net” in the accompanying condensed consolidated statement of operations, of $3,500 in the second quarter 2008. The remaining carrying value of $5,004 is included in “Investments” in the condensed consolidated balance sheets.

(11)	Discontinued Operations

Prior to 2007, we sold the stock of the companies comprising our former premium beverage and soft drink concentrate business segments (collectively, the “Beverage Discontinued Operations”) and the stock or the principal assets of the companies comprising the former utility and municipal services and refrigeration business segments (the “SEPSCO Discontinued Operations”) and closed two restaurants which were a component of the restaurant segment (the “Restaurant Discontinued Operations”). We have accounted for all of these operations as discontinued operations.

During the six months ended July 1, 2007, we recorded an additional loss of $247, before a tax benefit of $98, on the disposal of the Restaurant Discontinued Operations relating to finalizing the leasing arrangements for the two closed restaurants. There were no charges for discontinued operations during the six months ended June 29, 2008.

Current liabilities remaining to be liquidated relating to discontinued operations result from certain obligations not transferred to the respective buyers and consisted of the following:

	December 30,		June 29,
	2007		2008

Liabilities, primarily accrued income taxes, relating to the Beverage Discontinued Operations	$	6,639	$	6,639
Liabilities relating to the SEPSCO Discontinued Operations		573		550
Liabilities relating to the Restaurant Discontinued Operations		67		71
	$	7,279	$	7,260

We expect that the liquidation of these remaining liabilities associated with all of these discontinued operations as of June 29, 2008 will not have any material adverse impact on our condensed consolidated financial position or results of operations. To the extent any estimated amounts included in the current liabilities relating to discontinued operations are determined to be different from the amount required to liquidate the associated liability, any such amount will be recorded at that time as a component of gain or loss from disposal of discontinued operations.

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(12) Retirement Benefit Plans

We maintain two defined benefit plans, the benefits under which were frozen in 1992 and for which we have no unrecognized prior service cost. The components of the net periodic pension cost incurred by us with respect to these plans are as follows.

	Three Months Ended						Six Months Ended
	July 1,			June 29,			July 1,			June 29,
	2007			2008			2007			2008

Service cost (consisting entirely of plan administrative expenses)	$	23		$	24		$	45		$	48
Interest cost		55			55			110			110
Expected return on the plans’ assets		(58	)		(55	)		(116	)		(110	)
Amortization of unrecognized net loss		6			6			13			12
Net periodic pension cost	$	26		$	30		$	52		$	60

(13)	Transactions with Related Parties

We continue to have related party transactions of the same nature and general magnitude as those described in Note 28 to the consolidated financial statements contained in the Form 10-K, other than those related to recently completed Corporate Restructuring and those mentioned below:

Final Liquidating Distribution of Triarc Deerfield Holdings, LLC

As defined in an equity arrangement further described in Note 3 to our consolidated financial statements contained in our Form 10-K, the Deerfield Sale was an event of dissolution of Triarc Deerfield Holdings, LLC (“TDH”), a former subsidiary of ours. As of the date of liquidation, $743 payable to the minority shareholders of TDH was distributed to them in connection with its dissolution during April 2008.

Sublease to affiliate of Former Executives

As described in Note 28 to the consolidated financial statements contained in our 2007 Form 10-K, the affiliate of the Former Executives had subleased one of the floors of our former New York Headquarters. As of July 1, 2008, we entered into an agreement under which this same affiliate is subleasing additional office space in our former New York headquarters. Under the terms of that agreement, the affiliate subleased through the remaining approximately four-year term of the prime lease with annual rent of approximately $397, equal to the rent we incur under the prime lease.

(14)	Legal and Environmental Matters

In 2001, a vacant property owned by Adams Packing Association, Inc. (“Adams”), an inactive subsidiary of ours, was listed by the United States Environmental Protection Agency on the Comprehensive Environmental Response, Compensation and Liability Information System (“CERCLIS”) list of known or suspected contaminated sites. The CERCLIS listing appears to have been based on an allegation that a former tenant of Adams conducted drum recycling operations at the site from some time prior to 1971 until the late 1970s. The business operations of Adams were sold in December 1992. In February 2003, Adams and the Florida Department of Environmental Protection (the “FDEP”) agreed to a consent order that provided for development of a work plan for further investigation of the site and limited remediation of the identified contamination. In May 2003, the FDEP approved the work plan submitted by Adams’ environmental consultant and during 2004 the work under that plan was completed. Adams submitted its contamination assessment report to the FDEP in March 2004. In August 2004, the FDEP agreed to a monitoring plan consisting of two sampling events which occurred in January and June 2005 and the results were submitted to the FDEP for its review. In November 2005, Adams received a letter from the FDEP identifying certain open issues with respect to the property. The letter did not specify whether any further actions are required to be taken by Adams. Adams sought clarification from the FDEP in order to attempt to resolve this matter. On May 1, 2007, the FDEP sent a letter clarifying their prior correspondence and reiterated the open issues identified in their November 2005 letter. In addition, the FDEP offered Adams the option of voluntarily taking part in a recently adopted state program that could lessen site clean up standards, should such a clean up be required after a mandatory further study and site assessment report. With our consultants and outside counsel, we reviewed this option and sent our response and proposed work plan to FDEP on April 24, 2008 and are awaiting FDEP's response. Nonetheless, based on amounts spent prior to 2007 of $1,667 for all of these costs and after taking into consideration various legal defenses available to us, including Adams, we expect that the final resolution of this matter will not have a material effect on our financial position or results of operations.

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On April 25, 2008, a putative class action complaint was filed by Ethel Guiseppone, on behalf of herself and others similarly situated, against Wendy's, its directors, us and Trian Partners in the Franklin County, Ohio Court of Common Pleas. The complaint alleges breach of fiduciary duties arising out of the approval of the Merger Agreement on April 23, 2008. The complaint seeks certification of the proceeding as a class action, preliminary and permanent injunctions against disenfranchising the purported class and consummating the Merger, other equitable relief, attorneys fees and other relief as the court deems proper and just. On July 15, 2008, the plaintiffs amended the complaint and Triarc and Trian Partners are no longer named as defendants. Should an unfavorable ruling occur, there exists the possibility of a delay in the consummation of the Merger Agreement.

On June 13, 2008, a putative class action complaint was filed by Peter D. Ravanis and Dorothea Ravanis, individually and on behalf of others similarly situated, against Wendy’s, its directors and Triarc in the Supreme Court of New York, New York County. The complaint, amended on June 20, 2008, alleges that Wendy's directors breached their fiduciary duties in connection with the approval of the merger agreement on April 23, 2008, and that we aided and abetted such breach. The complaint alleges also that the documents issued in connection with seeking shareholder approval of the merger agreement are false and misleading. The complaint seeks certification of the proceeding as a class action, preliminary and permanent injunctions against shareholder votes on the proposed merger, rescission of the merger if consummated, unspecified damages, attorneys' fees and other relief as the court deems proper and just. The parties have agreed to stay this action pending developments in similar actions pending in Ohio against only Wendy's and its directors. In the event that this New York action proceeds, we intend vigorously to defend against plaintiffs' claims.

In addition to the matters described above, we are involved in other litigation and claims incidental to our current and prior businesses. We have reserves for all of our legal and environmental matters aggregating approximately $1,729 as of June 29, 2008. Although the outcome of such matters cannot be predicted with certainty and some of these matters may be disposed of unfavorably to us, based on currently available information, including legal defenses available to us, and given the aforementioned reserves and our insurance coverages, we do not believe that the outcome of such legal and environmental matters will have a material adverse effect on our condensed consolidated financial position or results of operations.

(15)	Income Taxes

The effective tax rate benefit on the loss from continuing operations before income taxes and minority interests for the three months and six months ended July 1, 2007 was 57% and 63%, respectively, as compared to the effective tax rate benefit of 50% and 17% on the loss from continuing operations before income taxes and minority interests for the three months and six months ended June 29, 2008, respectively. These rates vary from the U.S. federal statutory rate of 35% due to (1) the effect of non-deductible compensation and other non-deductible expenses, (2) state income taxes, net of federal income tax benefit, (3) the effect of the decline in value of our DFR investment in the 2008 first quarter and related declared dividend, (4) the effect of recognizing a previously unrecognized contingent tax benefit in the 2007 second quarter in connection with the settlement of certain obligations to the Executives and (5) adjustments to our uncertain tax positions in the 2007 and 2008 periods.

We distributed our investment in the common stock of DFR as a dividend to our stockholders as described in Note 3. As a result of the dividend, the tax loss that resulted from the decline in value of our investment through the record date of the dividend to our stockholders is not deductible for income tax purposes and no income tax benefit was recorded related to this loss.

In the first quarter of 2008, an examination of our state income tax returns for fiscal years 1998 through 2000 was settled in one of the states in which we do business. In connection with the examination results and due to the settlement of the tax position for less than we previously anticipated, we recorded an income tax benefit of $1,516. There were no other significant changes to unrecognized tax benefits in the 2008 first half. We do not anticipate a significant change in unrecognized tax positions during the next year.

We recognize interest related to unrecognized tax benefits in “Interest Expense” and penalties in “General and administrative expenses”. As a result of the completion of the aforementioned state examination, a benefit was recorded for a reduction of interest expense related to unrecognized tax benefits of $1,071. With the exception of current interest charges for existing unrecognized tax benefits, there were no other significant changes to interest or penalties in the 2008 first half.

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We include unrecognized tax benefits and the related interest and penalties for discontinued operations in “Current liabilities relating to discontinued operations” in the accompanying condensed consolidated balance sheets. There were no changes in those amounts during the 2008 first half.

(16)	Business Segments

Prior to the Deerfield Sale (see Note 3) on December 21, 2007, we managed and internally reported our operations as two business segments: (1) the operation and franchising of restaurants (“Restaurants”) and (2) asset management (“Asset Management”). We currently manage and internally report our operations as one business segment; the operation and franchising of restaurants. We evaluated segment performance and allocated resources based on the segment’s earnings (loss) before interest, taxes, depreciation and amortization (“EBITDA”). EBITDA is defined as operating profit (loss) as adjusted by depreciation and amortization. In computing EBITDA and operating profit (loss), interest expense and non-operating income and expenses were not considered. General corporate assets consist primarily of cash and cash equivalents, restricted cash equivalents, short-term investments, investment settlements receivable, non-current investments and properties.

The following is a summary of our segment information:

	Three Months Ended						Six Months Ended
	July 1,			June 29,			July 1,			June 29,
	2007			2008			2007			2008
Revenues:
Restaurants	$	299,980		$	313,014		$	586,148		$	615,868
Asset Management		16,841			-			32,719			-
Consolidated revenues	$	316,821		$	313,014		$	618,867		$	615,868
EBITDA:
Restaurants	$	38,911		$	33,867		$	75,313		$	66,133
Asset Management		3,397			-			6,329			-
General corporate		(92,359	)		(7,926	)		(107,224	)		(16,142	)
Consolidated EBITDA		(50,051	)		25,941			(25,582	)		49,991
Depreciation and amortization:
Restaurants		14,850			16,603			28,485			31,520
Asset Management		2,463			-			3,714			-
General corporate		1,091			1,090			2,190			2,166
Consolidated depreciation and amortization		18,404			17,693			34,389			33,686
Operating (loss) profit:
Restaurants		24,061			17,264			46,828			34,613
Asset Management		934			-			2,615			-
General corporate		(93,450	)		(9,016	)		(109,414	)		(18,308	)
Consolidated operating (loss) profit		(68,455	)		8,248			(59,971	)		16,305
Interest expense		(15,286	)		(13,944	)		(30,675	)		(27,435	)
Investment income (loss), net		17,625			(9,199	)		40,773			(75,121	)
Other income (expense), net		3,158			1,224			4,765			(3,341	)
Consolidated loss from continuing operations before income taxes and minority interests	$	(62,958	)	$	(13,671	)	$	(45,108	)	$	(89,592	)

	June 29,
	2008
Identifiable assets:
Restaurants	$	1,123,297
General corporate		232,638
Consolidated total assets	$	1,355,935

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(17) Accounting Standards

Accounting Standards Adopted during 2008

We adopted SFAS 157 during the 2008 first quarter. See Note 8 for further discussion regarding this adoption.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities – Including an Amendment of FASB Statement No. 115” (“SFAS 159”). SFAS 159 does not mandate but permits the measurement of many financial instruments and certain other items at fair value in order to provide reporting entities the opportunity to mitigate volatility in reported earnings, without having to apply complex hedge accounting provisions, caused by measuring related assets and liabilities differently. SFAS 159 requires the reporting of unrealized gains and losses on items for which the fair value option has been elected in earnings at each subsequent reporting date. SFAS 159 also requires expanded disclosures related to its application. SFAS 159 was effective commencing with our first fiscal quarter of 2008 (see Note 8). We did not elect the fair value option described in SFAS 159 for financial instruments and certain other items. We did, however, adopt the provisions of SFAS 159 which relate to the amendment of FASB Statement No. 115, “Accounting for Certain Investments in Debt and Equity Securities,” which applies to all entities with available-for-sale and trading securities in the first quarter of 2008 (see Note 8). These provisions of SFAS 159 require separate presentations of the fair value of available for sale securities and trading securities. In addition, cash flows from trading security transactions are classified based on the nature and purpose for which the securities were acquired. The adoption of these provisions did not have an impact on our consolidated financial statements.

Accounting Standards Not Yet Adopted

In December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business Combinations” (“SFAS 141(R)”), and SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements – an amendment of ARB No. 51” (“SFAS 160”). These statements change the way companies account for business combinations and noncontrolling interests by, among other things, requiring (1) more assets and liabilities to be measured at fair value as of the acquisition date, including a valuation of the entire company being acquired where less than 100% of the company is acquired, (2) an acquirer in preacquisition periods to expense all acquisition-related costs and (3) noncontrolling interests in subsidiaries initially to be measured at fair value and classified as a separate component of equity. These statements are to be applied prospectively beginning with our 2009 fiscal year. However, SFAS 160 requires entities to apply the presentation and disclosure requirements retrospectively for all periods presented. Both standards prohibit early adoption. In addition, in April 2008, the FASB issued FASB Staff Position No. FAS 142-3, “Determination of the Useful Life of Intangible Assets” (“FSP FAS 142-3”). In determining the useful life of acquired intangible assets, FSP FAS 142-3 removes the requirement to consider whether an intangible asset can be renewed without substantial cost or material modifications to the existing terms and conditions and, instead, requires an entity to consider its own historical experience in renewing similar arrangements. FSP FAS 142-3 also requires expanded disclosure related to the determination of intangible asset useful lives. This staff position is effective for financial statements issued for fiscal years beginning in our 2009 fiscal year and may impact any intangible assets we acquire. The application of SFAS 160 will require reclassification of minority interests from a liability to a component of stockholders’ equity in our historical consolidated financial statements beginning in our 2009 fiscal year. Further, all of the statements referred to above could have a significant impact on the accounting for any future acquisitions. The impact will depend upon the nature and terms of such future acquisitions, if any.

In March 2008, the FASB issued SFAS No. 161, "Disclosures about Derivative Instruments and Hedging Activities" ("SFAS 161"). SFAS 161 requires companies with derivative instruments to disclose information that should enable financial-statement users to understand how and why a company uses derivative instruments, how derivative instruments and related hedged items are accounted for under SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities" (“SFAS 133”) and how these items affect a company's financial position, financial performance and cash flows. SFAS 161 affects only these disclosures and does not change the accounting for derivatives. SFAS 161 is to be applied prospectively beginning with the first quarter of our 2009 fiscal year. We are currently evaluating the impact, if any, that SFAS 161 will have on the disclosures in our consolidated financial statements.

In May 2008, the FASB issued SFAS No. 162, “Hierarchy of Generally Accepted Accounting Principles” (“SFAS 162”). This statement is intended to improve financial reporting by identifying a consistent framework, or hierarchy, for selecting accounting principles to be used in preparing financial statements of nongovernmental entities that are presented in conformity with GAAP. This statement will be effective 60 days following the Securities and Exchange Commission’s approval of the Public Company Accounting Oversight Board amendment to Auditing Standards Section 411, “The Meaning of Present Fairly in Conformity with Generally Accepted Accounting Principles.” We are currently evaluating the potential impact, if any, that SFAS 162 will have on our consolidated financial statements.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of Triarc Companies, Inc. (“Triarc” or the “Company”) and its subsidiaries should be read in conjunction with our accompanying condensed consolidated financial statements included elsewhere herein and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended December 30, 2007 (the “Form 10-K”). Item 7 of our Form 10-K describes the application of our critical accounting policies for which there have been no significant changes as of June 29, 2008. Certain statements we make under this Item 2 constitute “forward-looking statements” under the Private Securities Litigation Reform Act of 1995. See “Special Note Regarding Forward-Looking Statements and Projections” in “Part II – Other Information” preceding “Item 1.”

Introduction and Executive Overview

We currently operate in one business segment—the restaurant business through our Company-owned and franchised Arby’s restaurants. Prior to December 21, 2007, we also operated in the asset management business through our 63.6% capital interest in Deerfield & Company LLC (“Deerfield”). On December 21, 2007, we sold our capital interest in Deerfield (the “Deerfield Sale”) to Deerfield Capital Corp., a real estate investment trust (“DFR” or “the REIT”). As a result of the Deerfield Sale, our 2008 financial statements include only the financial position, results of operations and cash flows from the restaurant business.

In April 2007 we announced that we would be closing our New York headquarters and combining its corporate operations with our restaurant operations in Atlanta, Georgia (the “Corporate Restructuring”). The Corporate Restructuring included the transfer of substantially all of Triarc’s senior executive responsibilities to the Arby’s Restaurant Group, Inc. (“ARG”), a wholly-owned subsidiary of ours, executive team in Atlanta, Georgia. This transition was completed in early 2008. Accordingly, to facilitate this transition, the Company entered into negotiated contractual settlements (the “Contractual Settlements”) with our Chairman, who was also our then Chief Executive Officer, and our Vice Chairman, who was our then President and Chief Operating Officer, (collectively, the “Former Executives”) evidencing the termination of their employment agreements and providing for their resignation as executive officers as of June 29, 2007 (the “Separation Date”). In addition, we sold properties and other assets at our former New York headquarters in 2007 to an affiliate of the Former Executives and we incurred charges for the transition severance arrangements of other New York headquarters’ executives and employees who continued to provide services as employees through the 2008 first quarter.

In our restaurant business, we derive revenues in the form of sales by our Company-owned restaurants and franchise revenues which include (1) royalty income from franchisees, (2) franchise and related fees and (3) rental income from properties leased to franchisees. While approximately 76% of our existing Arby’s royalty agreements and substantially all of our new domestic royalty agreements provide for royalties of 4% of franchise revenues, our average royalty rate was 3.6% for the six months ended June 29, 2008. In our former asset management business, revenues were generated through the date of the Deerfield Sale in the form of asset management and related fees from our management of (1) collateralized debt and collateralized loan obligation vehicles (“CDOs”), and (2) investment funds and private investment accounts (“Funds”), including the REIT.

In our discussions of “Sales” and “Franchise Revenues” below, we discuss same-store sales. Beginning in our 2008 first quarter, we are reporting same-store sales commencing after a store has been open for fifteen continuous months (the “Fifteen Month Method”) consistent with the metrics used by our management for internal reporting and analysis. Historically, and including the 2007 fiscal year, the calculation of same-store sales commenced after a store was open for twelve continuous months (the “Twelve Month Method”). The sales discussion for the current quarter below provides the same-store sales percentage change using the new Fifteen Month Method, as well as our historical Twelve Month Method.

Our primary goal is to enhance the value of our Company by increasing the revenues of our restaurant business, which is expected to include (1) growing the number of Company-owned restaurants in the Arby’s system through acquisitions and development, effective national and local advertising initiatives, adding new menu offerings and implementing operational initiatives targeted at improving service levels and convenience, (2) the pending merger with Wendy’s International, Inc. (“Wendy’s”) (See “Pending Merger with Wendy’s International, Inc.” below) and (3) the possibility of other restaurant brand acquisitions.

We also derive investment income principally from the investment of our excess cash. In December 2005 we invested $75.0 million in an account (the “Equities Account”) which is managed by a management company (the “Management Company”) formed by the Former Executives and a director, who is also our former Vice Chairman (collectively, the “Principals”). The Equities Account is invested principally in equity securities, including derivative instruments, of a limited number of publicly-traded companies. In addition, the Equities Account invests in market put options in order to lessen the impact of significant market downturns. Investment income (loss) from this account includes realized investment gains (losses) from marketable security transactions, realized and unrealized gains (losses) on derivative instruments, interest and dividends. The Equities Account, including restricted cash equivalents, had a fair value of $90.2 million as of June 29, 2008.

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Our restaurant business has recently experienced trends in the following areas:

Revenues

Significant decreases in general consumer confidence in the economy as well as decreases in many consumers’ discretionary income caused by factors such as high fuel and food costs and a continuing softening of the economy, including the real estate market;

Continuing price competition in the quick service restaurant (“QSR”) industry, as evidenced by (1) value menu concepts, which offer comparatively lower prices on some menu items, (2) combination meal concepts, which offer a complete meal at an aggregate price lower than the price of the individual food and beverage items, (3) the use of coupons and other price discounting and (4) many recent product promotions focused on the lower prices of certain menu items;

Competitive pressures due to extended hours of operation by many QSR competitors, including breakfast and late night hours;

Competitive pressures from operators outside the QSR industry, such as the deli sections and in-store cafes of major grocery and other retail store chains, convenience stores and casual dining outlets offering prepared and take-out food purchases;

Increased availability to consumers of new product choices, including (1) healthy products driven by a greater consumer awareness of nutritional issues, (2) new products that tend to include larger portion sizes and more ingredients; (3) beverage programs which offer a wider selection of premium non-carbonated beverages, including coffee and tea products and (4) sandwiches with perceived higher levels of freshness, quality and customization; and

Competitive pressures from an increasing number of franchise opportunities seeking to attract qualified franchisees.

Cost of Sales

Higher commodity prices which have increased our food costs;

Higher fuel costs which have caused increases in our utility costs and the cost of goods we purchase under distribution contracts that became effective in the second quarter of 2007;

Federal, state and local legislative activity, such as minimum wage increases and mandated health and welfare benefits which have and are expected to continue to result in increased wages and related fringe benefits, including health care and other insurance costs; and

Legal or regulatory activity related to nutritional content or menu labeling which could result in increased costs.

Other

Increased competition among QSR competitors and other businesses for available development sites, higher development costs associated with those sites and higher borrowing costs in the lending markets typically used to finance new unit development and remodels.

We experience the effects of these trends directly to the extent they affect the operations of our Company-owned restaurants and indirectly to the extent they affect sales at our franchised locations and, accordingly, the royalties and franchise fees we receive from them.

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Pending Merger with Wendy’s International, Inc.

On April 23, 2008, we entered into a definitive merger agreement with Wendy’s for an all stock transaction in which Wendy’s shareholders will receive a fixed ratio of 4.25 shares of our Class A Common Stock for each share of Wendy’s common stock they own and in which Wendy’s would become a wholly-owned subsidiary of Triarc. Wendy’s stock options and other equity awards will generally convert upon completion of the merger into stock options and equity awards with respect to our Class A Common Stock, after giving effect to the exchange ratio. Under the agreement, our stockholders will be asked to approve the conversion of each share of our Class B Common Stock, Series 1, into one share of our Class A Common Stock, resulting in a post-merger company with a single class of common stock (“Wendy’s/Arby’s Common Stock”). Existing shares of Triarc Class A Common Stock will remain outstanding as shares of Wendy’s/Arby’s Common Stock. Wendy’s/Arby’s Common Stock is expected to be quoted on the New York Stock Exchange under the symbol “WEN.”

The transaction is subject to regulatory approvals, customary closing conditions and the approval of both Wendy’s shareholders and our stockholders. The transaction is expected to close in the second half of 2008. As of June 29, 2008 our deferred costs related to the merger were $13.4 million and are included in “Deferred costs and other assets.” There can be no assurance that shareholder, stockholder and other approvals will be obtained or that the merger will be consummated.

The Deerfield Sale

The Deerfield Sale resulted in non-cash proceeds aggregating $134.6 million consisting of 9,629,368 shares of convertible preferred stock of the REIT with a then estimated fair value of $88.4 million and $48.0 million principal amount of Series A Senior Secured Notes of a subsidiary of the REIT due in December 2012 (the “REIT Notes”) with a then estimated fair value of $46.2 million. We also retained ownership of 205,642 common shares in the REIT as part of a pro rata distribution to the members of Deerfield prior to the Deerfield Sale. The Deerfield Sale resulted in a pretax gain of approximately $40.2 million which was recorded in the fourth quarter of 2007.

The REIT Notes bear interest at the three-month London InterBank Offered Rate (“LIBOR”) (2.69% at June 29, 2008) plus 5% through December 31, 2009, increasing 0.5% each quarter from January 1, 2010 through June 30, 2011 and 0.25% each quarter from July 1, 2011 through their maturity. The REIT Notes are secured by certain equity interests of the REIT and certain of its subsidiaries. The $1.8 million original imputed discount on the REIT Notes is being accreted to “Other income (expense), net” using the interest rate method. The REIT Notes, net of unamortized discount, are reflected as “Notes receivable from related party”.

Other than Temporary Losses and Equity in Losses of the REIT

On March 18, 2008, in response to unanticipated credit and liquidity events in 2008, the REIT announced that it was repositioning its investment portfolio to focus on agency-only residential mortgage-backed securities and away from its principal investing segment to its asset management segment with its fee-based revenue streams. In addition, it stated that during the first quarter of 2008, its portfolio was adversely impacted by further deterioration of the global credit markets and, as a result, it sold $2.8 billion of its agency and $1.3 billion of it AAA-rated non-agency mortgage-backed securities and significantly reduced the net notional amount of interest rate swaps used to hedge a portion of its mortgage-backed securities by $4.2 billion, all at a net after-tax loss of $294.3 million to the REIT.

Based on the events discussed above and their negative effect on the market price of the REIT common stock, we concluded that the fair value and, therefore, the carrying value of our investment in the 9,629,368 common shares, which were received upon the conversion of the convertible preferred stock as of March 11, 2008 (as discussed below), as well as the 205,642 common shares which were distributed to us in connection with the Deerfield Sale, were impaired. As a result, as of March 11, 2008, we recorded an other than temporary loss which is included in “Investment income (loss), net,” for the six months ended June 29, 2008 of $67.6 million (without tax benefit as discussed below) which includes $11.1 million of pre-tax unrealized holding losses previously recorded as of December 30, 2007 and included in “Accumulated other comprehensive income (loss)”, a component of stockholder’s equity. These common shares were considered available-for-sale securities due to the limited period they were to be held as of March 11, 2008 (the “Determination Date”) before the dividend distribution of the shares to our stockholders on April 4, 2008 (as discussed below).

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Additionally, from December 31, 2007 through the Determination Date, we recorded approximately $0.8 million of equity in net losses of the REIT which are included in “Other income (expense), net” for the six months ended June 29, 2008 related to our investment in the 205,642 common shares of the REIT discussed above which were accounted for on the equity method through the Determination Date.

Conversion of Convertible Preferred Stock and Dividend of REIT Common Stock

On March 11, 2008, DFR stockholders approved the one-for-one conversion of all its outstanding convertible preferred stock into DFR common stock which converted the 9,629,368 preferred shares we held into a like number of shares of common stock. On March 11, 2008, our Board of Directors approved the distribution of our 9,835,010 shares of DFR common stock, which also included the 205,642 common shares of the REIT discussed above, to our stockholders. The dividend which was valued at $14.5 million was paid on April 4, 2008 to holders of record of our class A common stock (the “Class A Common Stock”) and our class B common stock (the “Class B Common Stock”) on March 29, 2008 (the “Record Date”). We also recorded an additional impairment charge from March 11, 2008 through the Record Date of $0.5 million. As a result of the dividend, the income tax loss that resulted from the decline in value of our investment of $68.1 million is not deductible for income tax purposes and no income tax benefit was recorded related to this loss.

Presentation of Financial Information

We report on a fiscal year consisting of 52 or 53 weeks ending on the Sunday closest to December 31. Our second quarter of fiscal 2007 commenced on April 2, 2007 and ended on July 1, 2007 (the “three months ended July 1, 2007” or the “2007 second quarter”). Our second quarter of fiscal 2008 commenced on March 31, 2008 and ended on June 29, 2008 (the “three months ended June 29, 2008” or the “2008 second quarter”). Our first half of fiscal 2007 commenced on January 1, 2007 and ended on July 1 2007 (the “six months ended July 1, 2007” or the “2007 first half”). Our first half of fiscal 2008 commenced on December 31, 2007 and ended on June 29, 2008 (the “six months ended June 29, 2008” or the “2008 first half”). Each quarter contained 13 weeks and each half contained 26 weeks. Our 2007 second quarter and first half included the calendar basis reported results of Deerfield. The difference in reporting basis is not material to our condensed consolidated financials statements. With the exception of Deerfield, all references to years, halves and quarters relate to fiscal periods rather than calendar periods.

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Results of Operations

Three Months Ended June 29, 2008 Compared with Three Months Ended July 1, 2007

Presented below is a table that summarizes our results of operations and compares the amount and percent of the change between the 2007 second quarter and the 2008 second quarter. Certain percentage changes between these quarters are considered not measurable or not meaningful (“n/m”).

	Three Months Ended
	July 1,			June 29,			Change
	2007			2008			Amount			Percent
	(In Millions Except Restaurant Count and Percents)
Revenues:
Sales	$	278.6		$	291.3		$	12.7			4.6%
Franchise revenues		21.4			21.7			0.3			1.4%
Asset management and related fees		16.8			-			(16.8	)		(100.0)%
		316.8			313.0			(3.8	)		(1.2)%
Costs and expenses:
Cost of sales		204.9			220.5			15.6			7.6%
Cost of services		6.3			-			(6.3	)		(100.0)%
Advertising		20.7			24.5			3.8			18.4%
General and administrative		56.0			42.1			(13.9	)		(24.8)%
Depreciation and amortization		18.4			17.7			(0.7	)		(3.8)%
Facilities relocation and corporate restructuring		79.0			-			(79.0	)		(100.0)%
		385.3			304.8			(80.5	)		(20.9)%
Operating (loss) profit		(68.5	)		8.2			76.7			n/m
Interest expense		(15.3	)		(13.9	)		1.4			9.2%
Investment income (loss), net		17.6			(9.2	)		(26.8	)		n/m
Other income, net		3.2			1.2			(2.0	)		(62.5)%
Loss from continuing operations before benefit from income taxes and minority interests		(63.0	)		(13.7	)		49.3			78.3%
Benefit from income taxes		36.0			6.8			(29.2	)		(81.1)%
Minority interests in income of consolidated subsidiaries		(1.0	)		-			1.0			100.0%
Net loss	$	(28.0	)	$	(6.9	)	$	21.1			75.4%

Certain items as a percentage of sales:
Cost of sales		73.5%			75.7%
Gross margin (as defined in “Cost of Sales”)		26.5%			24.3%
Advertising		7.4%			8.4%
Same-store sales (Fifteen Month Method):
Company-owned restaurants		(1.7)%			(3.7)%
Franchised restaurants		1.2%			(3.0)%
Systemwide		0.3%			(3.3)%

Restaurant count:	Company-Owned			Franchised			Systemwide
Restaurant count at July 1, 2007		1,081			2,540			3,621
Opened since July 1, 2007		53			99			152
Closed since July 1, 2007		(14	)		(40	)		(54	)
Net purchased from (sold by) franchisees since July 1, 2007		49			(49	)		-
Restaurant count at June 29, 2008		1,169			2,550			3,719

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Sales

Our sales, which were generated entirely from our Company-owned restaurants, increased $12.7 million, or 4.6%, to $291.3 million for the three months ended June 29, 2008 from $278.6 million for the three months ended July 1, 2007, primarily due to a $22.7 million increase in sales from the 88 net Company-owned restaurants we added since July 1, 2007. Of the 49 net restaurants we acquired from franchisees, 41 are in the California market (the “California Restaurants”) and were purchased from a franchisee on January 14, 2008 (the “California Restaurant Acquisition”). The California Restaurants generated approximately $9.0 million of sales for us during the 2008 second quarter. The increase in sales due to the number of Company-owned restaurants added since July 1, 2007 was partially offset by a $10.0 million decrease in sales due to a 3.7% decrease in same-store sales during the 2008 second quarter (a 3.9% decrease under the Twelve Month Method). Same store sales of our Company-owned restaurants decreased principally due to lower sales volume from a decline in customer traffic as a result of (1) decreases in many consumers’ discretionary income due to factors such as high fuel and food prices and the continuing softening of the economy, (2) increasing competitive price discounting and (3) less effective marketing programs in the 2008 second quarter compared with the 2007 second quarter at driving sales growth. These negative factors were partially offset by the effect of selective price increases that were implemented subsequent to the 2007 second quarter.

Franchise Revenues

Our franchise revenues, which were generated entirely from the franchised restaurants, increased $0.3 million, or 1.4%, to $21.7 million for the three months ended June 29, 2008 from $21.4 million for the three months ended July 1, 2007. Excluding $0.6 million of rental income from properties leased to franchisees that is included in franchise revenues for the three months ended June 29, 2008, franchise revenues decreased $0.3 million reflecting a $0.6 million decrease due to a 3.0% decrease in same-store sales of the franchised restaurants in the 2008 second quarter (a 3.0% decrease under the Twelve Month Method), partially offset by higher royalties of $0.5 million from the net franchised restaurants opened since July 1, 2007 as detailed in the table above (excluding approximately $0.3 million as a result of the California Restaurant Acquisition). In addition, franchise and related fees decreased $0.2 million compared to the prior year. The decrease in same-store sales of the franchised restaurants in the 2008 second quarter was due primarily to the same factors discussed above under “Sales.”

Asset Management and Related Fees

As a result of the Deerfield Sale on December 21, 2007, we no longer have any revenue from asset management and related fees.

Cost of Sales

Our cost of sales resulted entirely from the Company-owned restaurants. Cost of sales increased and resulted in a decrease in gross margin to 24.3%, for the three months ended June 29, 2008 from a gross margin of 26.5%, for the three months ended July 1, 2007. We define gross margin as the difference between sales and cost of sales divided by sales. Gross margin was negatively impacted by increased (1) labor costs due to the Federal and state minimum wage increases subsequent to the second quarter of 2007, (2) utilities costs as a result of higher fuel costs and increased energy usage due to new equipment related to our major third quarter 2007 new product offering and (3) costs under new distribution contracts that became effective late in the second quarter of 2007 which also include continuing increases from higher fuel costs. In addition to these increased costs, gross margin was negatively impacted by the de-leveraging effect of our same-store sales decreases on our fixed and semi-variable costs. These negative factors were partially offset by decreases in the food cost component of gross margin due to differences in the menu mixes of our 2008 second quarter and 2007 second quarter marketing programs. These food cost decreases, however, were partially offset by increases in the cost of beef and other menu items, a portion of which relates to the expiration of favorable commodity contracts. Further, the 2008 second quarter gross margin was positively impacted by the selective price increases that were implemented subsequent to the 2007 second quarter.

Cost of Services

As a result of the Deerfield Sale, we no longer incur any cost of services. For the three months ended July 1, 2007, our cost of services resulted entirely from the management of CDOs and Funds by Deerfield.

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Advertising

Our advertising consists of local and national media, direct mail and outdoor advertising as well as point of sale materials and local restaurant marketing. These expenses increased to 8.4% of sales for the three months ended June 29, 2008 from 7.4% of sales for the three months ended July 1, 2007 primarily due to (1) the timing of some of our print media which occurred in the second quarter of 2008 but in the first or third quarter of 2007, (2) additional advertising costs related to markets in which we have added new restaurants, particularly the California Restaurant market and (3) incremental spending in the 2008 second quarter related to national cable and internet advertising.

General and Administrative

Our general and administrative expenses decreased $13.9 million, or 24.8%, principally due to (1) $7.1 million of general and administrative expenses incurred in the 2007 second quarter at our former asset management segment, (2) a $7.1 million decrease in corporate general and administrative expenses as a result of the effects of the Corporate Restructuring, (3) a $1.2 million decrease in relocation costs principally attributable to additional costs in the prior year related to estimated declines in market value and increased carrying costs for homes we purchased for resale from relocated employees and (4) a $0.5 million decrease in charitable contributions related to a contribution made in the second quarter of 2007 to The Arby’s Foundation, Inc. (the “Foundation”), a not-for-profit charitable foundation in which we have non-controlling representation on the board of directors, which contribution for 2008 was made in the first quarter of 2008. These decreases were partially offset by a $1.6 million charge in the 2008 second quarter for an ongoing examination of certain franchise tax returns for fiscal years 1998 through 2004.

Depreciation and Amortization

Our depreciation and amortization decreased $0.7 million, or 3.8%, principally reflecting (1) $2.5 million of depreciation and amortization expenses and impairment charges incurred in the 2007 second quarter at our former asset management segment and (2) $0.6 million of depreciation and amortization in the 2007 second quarter related to certain assets purchased as part of our acquisition in 2002 of Sybra, LLP (“Sybra”), a wholly-owned subsidiary of ours, which are now fully depreciated. These decreases were partially offset by (1) a $1.6 million increase in depreciation related to the property and equipment for the 88 net Company-owned restaurants added since July 1, 2007, (2) a $0.3 million increase related to the new restaurant equipment primarily related to our major new product offering in the third quarter of 2007 and (3) a $0.7 million increase in restaurant impairment charges as a result of an increased number of underperforming units.

Facilities Relocation and Corporate Restructuring

The $79.0 million charge for the 2007 second quarter primarily consists of general corporate severance related to the transfer of substantially all of Triarc’s senior executive responsibilities to the ARG executive team in Atlanta, Georgia as part of the Corporate Restructuring.

Interest Expense

Interest expense decreased $1.4 million, or 9.2%, principally reflecting the effects of lower interest rates on our variable rate debt, partially offset by higher average debt outstanding.

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Investment Income (Loss), Net

The following table summarizes and compares the major components of investment income (loss), net:

	Three Months Ended
	July 1,			June 29,
	2007			2008			Change
	(In Millions)

Net gains (losses):
Cost method investments and limited partnerships	$	12.7		$	-		$	(12.7	)
Derivative instruments		3.0			(6.2	)		(9.2	)
Available-for-sale securities		0.9			0.3			(0.6	)
Other		-			(0.1	)		(0.1	)
Interest income		2.4			0.2			(2.2	)
Other than temporary losses		(1.7	)		(3.5	)		(1.8	)
Other		0.3			0.1			(0.2	)
	$	17.6		$	(9.2	)	$	(26.8	)

Our recognized net gains (losses) on securities include realized investment gains (losses) from marketable security transactions and realized and unrealized gains (losses) on derivative instruments. The gains in the 2007 second quarter related to cost investments and limited partnerships represent (1) $8.4 million of gains realized that did not recur in the current year related to the transfer of several cost method investments from two deferred compensation trusts (“Deferred Compensation Trusts”) to the Former Executives and (2) $4.3 million of gains on the sale of other cost investments that did not recur in the current year.

Our interest income decreased $2.2 million due to lower average outstanding balances of our interest-bearing investments principally as a result of the cash equivalents used in connection with the Corporate Restructuring and interest income recognized in the 2007 second quarter at our former asset management segment.

For the second quarter of 2007, the other than temporary losses related to the decline in the market values of four of our available-for-sale investments in CDOs related to Deerfield. The other than temporary loss in the 2008 second quarter represents a decline in the value of our investment in Jurlique International Pty Ltd., an Australian skin and beauty products company not publicly traded (“Jurlique”).

All recognized gains and losses may vary significantly in future periods depending upon changes in the value of our investments and the timing of the sales of our remaining investments. Any other than temporary losses of our remaining investments are dependent upon the underlying economics and/or volatility in their value as available-for-sale securities and cost method investments and may or may not recur in future periods.

As of June 29, 2008, we had unrealized holding gains and (losses) on available-for-sale securities of $9.1 million and ($6.7) million, respectively, before income taxes included in “Accumulated other comprehensive loss.” Our evaluation of the unrealized losses has determined that these losses are not other than temporary. Should we decide to sell any of the investments we hold as of June 29, 2008 on which we have unrealized gains or losses, or if any of the unrealized losses continue such that we believe they have become other than temporary, we would recognize their effect on the related investments at that time.

Other Income, Net

	Three Months Ended
	July 1,		June 29,
	2007		2008		Change
	(In Millions)

Gain on sale of unconsolidated business	$	2.6	$	-	$	(2.6	)
Interest income other than on investments		0.2		1.0		0.8
Other		0.4		0.2		(0.2	)