10-K

                                 [TRIARC LOGO]

                             TRIARC COMPANIES, INC.

                                   FORM 10-K

                           FOR THE FISCAL YEAR ENDED

                               DECEMBER 29, 2002










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                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                              -------------------
                                   FORM 10-K

(MARK ONE)
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
    EXCHANGE ACT OF 1934
    FOR THE FISCAL YEAR ENDED DECEMBER 29, 2002.

                                       OR

[ ] 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                       (I.R.S. EMPLOYER
       INCORPORATION OR ORGANIZATION)                       IDENTIFICATION NO.)

               280 PARK AVENUE                                     10017
             NEW YORK, NEW YORK                                 (ZIP CODE)
  (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)



       REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (212) 451-3000
                              -------------------
          SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:


                                                    NAME OF EACH EXCHANGE
                TITLE OF EACH CLASS                  ON WHICH REGISTERED
                -------------------                  -------------------
                                                
Class A Common Stock, $.10 par value               New York Stock Exchange


          SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
                                      None

    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 if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]

    Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2).  Yes [x]  No [ ]

    The aggregate market value of the outstanding shares of the registrant's
Class A Common Stock (the only outstanding class of the registrant's common
equity) held by non-affiliates of the registrant was approximately $396,516,780
as of June 30, 2002. There were 20,448,722 shares of the registrant's Class A
Common Stock outstanding as of March 15, 2003.

                      DOCUMENTS INCORPORATED BY REFERENCE

    Items 10, 11, 12 and 13 of Part III of this 10-K incorporates information by
reference from an amendment hereto or to the registrant's definitive proxy
statement, in either case which will be filed no later than 120 days after
December 29, 2002.

================================================================================








PART I
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS AND PROJECTIONS

    Certain statements in this Annual Report on Form 10-K, including statements
under 'Item 1. Business' and 'Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations,' that are not historical facts,
including most importantly, information concerning possible or assumed future
results of operations of Triarc Companies, Inc. and its subsidiaries and those
statements preceded by, followed by, or that include the words 'may,'
'believes,' 'expects,' 'anticipates,' or the negation thereof, or similar
expressions, constitute 'forward-looking statements' within the meaning of the
Private Securities Litigation Reform Act of 1995. All statements which address
operating performance, events or developments that are expected or anticipated
to occur in the future, including statements relating to revenue growth,
earnings per share growth or statements expressing general optimism about future
operating results, are forward-looking statements within the meaning of the
Reform Act. These forward-looking statements are based on our current
expectations, speak only as of the date of this Form 10-K and are susceptible to
a number of risks, uncertainties and other factors. Our actual results,
performance and achievements may differ materially from any future results,
performance or achievements expressed or implied by such forward-looking
statements. For those statements, we claim the protection of the safe-harbor for
forward-looking statements contained in the Reform Act. Many important factors
could affect our future results and could cause those results to differ
materially from those expressed in the forward-looking statements contained
herein. Such factors include, but are not limited to, the following:

         Competition, including pricing pressures, the potential impact of
         competitors' new units on sales by Arby's'r' restaurants and consumers'
         perceptions of the relative quality, variety and value of the food
         products offered;

         Success of operating initiatives;

         Development and operating costs;

         Advertising and promotional efforts;

         Brand awareness;

         The existence or absence of positive or adverse publicity;

         Market acceptance of new product offerings;

         New product and concept development by competitors;

         Changing trends in consumer tastes and preferences (including changes
         resulting from health or safety concerns with respect to the
         consumption of beef, french fries or other foods or the effects of
         food-borne illnesses) and in spending and demographic patterns;

         The business and financial viability of key franchisees;

         Availability, location and terms of sites for restaurant development by
         the Company and its franchisees;

         The ability of franchisees to open new restaurants in accordance with
         their development commitments, including the ability of franchisees to
         finance restaurant development;

         Delays in opening new restaurants or completing remodels;

         Anticipated and unanticipated restaurant closures by the Company and
         its franchisees;

         The ability to identify, attract and retain potential franchisees with
         sufficient experience and financial resources to develop and operate
         Arby's restaurants;

         Changes in business strategy or development plans;

         Quality of the Company's and franchisees' management;

         Availability, terms and deployment of capital;

         Business abilities and judgment of the Company's and franchisees'
         personnel;

         Availability of qualified personnel to the Company and to franchisees;

         Labor and employee benefit costs;

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         Availability and cost of energy, raw materials, ingredients and
         supplies;

         The potential impact that interruptions in the distribution of supplies
         of food and other products to Arby's restaurants could have on sales at
         Company-owned restaurants and the royalties that Arby's receives from
         franchisees;

         Availability and cost of workers' compensation and general liability
         premiums and claims experience;

         Changes in national, regional and local economic, business or political
         conditions in the countries and other territories in which the Company
         and its franchisees operate;

         Changes in government regulations, including franchising laws,
         accounting standards, environmental laws, minimum wage rates and
         taxation requirements;

         The costs, uncertainties and other effects of legal, environmental and
         administrative proceedings;

         The impact of general economic conditions on consumer spending,
         including a slower consumer economy and the effects of war or terrorist
         activities;

         Adverse weather conditions; and

         Other risks and uncertainties affecting the Company and its
         subsidiaries referred to in this Form 10-K (see especially 'Item 1.
         Business -- Risk Factors' and 'Item 7. Management's Discussion and
         Analysis of Financial Condition and Results of Operations') and in our
         other current and periodic filings with the Securities and Exchange
         Commission, all of which are difficult or impossible to predict
         accurately and many of which are beyond our control.

    We will not undertake and specifically decline any obligation to publicly
release the result of any revisions which may be made to any forward-looking
statements to reflect events or circumstances after the date of such statements
or to reflect the occurrence of anticipated or unanticipated events. In
addition, it is our policy generally not to make any specific projections as to
future earnings, and we do not endorse any projections regarding future
performance that may be made by third parties.

ITEM 1. BUSINESS.

INTRODUCTION

    We are a holding company and, through our subsidiaries, the franchisor of
the Arby's restaurant system and an operator of 239 Arby's restaurants located
in the United States. Our corporate predecessor was incorporated in Ohio in
1929. We reincorporated in Delaware in June 1994. Our principal executive
offices are located at 280 Park Avenue, New York, New York 10017 and our
telephone number is (212) 451-3000. The Company makes its annual report on
Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and
amendments to such reports, available, free of charge, on its website as soon as
reasonably practicable after such reports are electronically filed with, or
furnished to, the Securities and Exchange Commission. Our website address is:
www.triarc.com. Information contained on our website is not part of this Annual
Report on Form 10-K.

BUSINESS STRATEGY

    The key elements of our business strategy include (i) using our resources to
grow our restaurant franchising business and our restaurant operations, (ii)
evaluating and making various acquisitions and business combinations, whether in
the restaurant industry or otherwise, (iii) building strong operating management
teams for each of our current and future businesses and (iv) providing strategic
leadership and financial resources to enable these management teams to develop
and implement specific, growth-oriented business plans. The implementation of
this business strategy may result in increases in expenditures for, among other
things, acquisitions and, over time, marketing and advertising. See 'Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations.' It is our policy to publicly announce an acquisition or business
combination only after an agreement with respect to such acquisition or business
combination has been reached.

2







    The Company's cash, cash equivalents and investments (including restricted
cash, but excluding investments related to deferred compensation arrangements)
at December 29, 2002 totaled approximately $668 million. At such date, the
Company's consolidated indebtedness was approximately $387 million, including
approximately $255 million of debt issued by a subsidiary of Arby's, Inc. and
$98 million of debt issued by Sybra, Inc. None of the debt of the Arby's
subsidiary or Sybra has been guaranteed by Triarc. The Company's cash, cash
equivalents and investments (other than approximately $30.6 million of
restricted cash) do not secure such debt. The Company is evaluating its options
for the use of this significant cash, cash equivalents and investment position,
including acquisitions, share repurchases and investments.

ACQUISITION OF SYBRA, INC.

    On December 27, 2002, the Company completed the acquisition of Sybra, Inc.,
the second largest franchisee of the Arby's'r' brand, pursuant to a plan of
reorganization previously confirmed by the United States Bankruptcy Court for
the Southern District of New York on November 25, 2002.

    Sybra, Inc., formerly a subsidiary of I.C.H. Corporation which filed for
reorganization under Chapter 11 of the Bankruptcy Code in February 2002, owned
and operated, as of December 27, 2002, 239 Arby's restaurants in nine states
located primarily in Michigan, Texas, Pennsylvania, Florida and New Jersey. In
fiscal years 2001 and 2002, Sybra had revenues of approximately $200 million and
$209 million, respectively.

    In return for 100% of the equity of a reorganized Sybra, the Company paid
approximately $8.3 million to ICH's creditors. In addition, the Company invested
approximately $14.2 million in Sybra and Sybra remains exclusively liable for
its long-term debt and capital lease obligations, which aggregated approximately
$98 million as of December 29, 2002. The Company has also made available to
Sybra a $5.0 million standby financing facility for each of three years (up to
$15.0 million in the aggregate) to fund any operating shortfalls of Sybra.

SALE OF BEVERAGE BUSINESS

    As previously reported, on October 25, 2000, we completed the sale of our
beverage business by selling all the outstanding capital stock of Snapple
Beverage Group, Inc. and Royal Crown Company, Inc. to affiliates of Cadbury
Schweppes plc. The purchase and sale agreement for the transaction provided for
a post-closing adjustment, the amount of which is in dispute. Cadbury initially
stated that it believed that it was entitled to receive from us a post-closing
adjustment of approximately $27.6 million, and we initially stated, on the other
hand, that we believed that we were entitled to receive from Cadbury a
post-closing adjustment of approximately $5.6 million, in each case plus
interest from the closing date. An arbitrator was selected by Triarc and Cadbury
for the purpose of determining the amount of the post-closing adjustment. On
September 6, 2002 we filed a submission with the arbitrator in which we stated
that we believed that we are entitled to receive from Cadbury a post-closing
adjustment of approximately $0.8 million, plus interest from the closing date.
On October 21, 2002, Cadbury filed a submission with the arbitrator in which it
stated that it believes that it is entitled to receive from us a post-closing
adjustment of approximately $23.2 million, plus interest from the closing date.
In response to Cadbury's October 21, 2002 submission, on December 3, 2002, we
filed a reply submission with the arbitrator in which we stated that we believed
that neither party was entitled to a post-closing adjustment. Subsequent to the
filing of our reply submission, Cadbury requested the arbitrator to convene a
hearing for the purposes of taking witness testimony. By a letter to the
arbitrator dated December 20, 2002, we opposed such request. A decision on
Cadbury's request for a hearing has been deferred by the arbitrator pending
review of the parties' submissions. We currently expect the post-closing
adjustment process to be completed during 2003.

FISCAL YEAR

    We use a 52/53 week fiscal year convention for Triarc and our subsidiaries
whereby our fiscal year ends each year on the Sunday that is closest to December
31 of that year. Each fiscal year generally is comprised of four 13 week fiscal
quarters, although in some years the fourth quarter represents a 14 week period.

                                                                               3







BUSINESS SEGMENT

                 RESTAURANT FRANCHISING AND OPERATIONS (ARBY'S)

THE ARBY'S RESTAURANT SYSTEM

    Through subsidiaries of Arby's, Inc. (which does business as the Triarc
Restaurant Group), which are the franchisors of the Arby's restaurant system, we
participate in the quick service restaurant segment of the domestic restaurant
industry. There are over 3,300 Arby's restaurants in the United States and
Canada and Arby's is the largest restaurant franchising system specializing in
the roast beef sandwich segment of the quick service restaurant industry.
According to Nation's Restaurant News, Arby's is the 9th largest quick service
restaurant chain in the United States. In addition to various slow-roasted roast
beef sandwiches, Arby's also offers an extensive menu of chicken, turkey, ham
and submarine sandwiches, side-dishes and salads. In 2001, Arby's introduced its
Market Fresh'r' line of turkey, ham, chicken and roast beef premium sandwiches
on a nationwide basis. Arby's also owns the T.J. Cinnamons'r' concept, which
consists of gourmet cinnamon rolls, gourmet coffees and other related products,
and the Pasta Connection'r' concept, which includes pasta dishes with a variety
of different sauces. Some Arby's franchisees multi-brand with T.J. Cinnamons or
Pasta Connection within their Arby's restaurants. Prior to the December 27, 2002
acquisition of Sybra (See Item 1. 'Business -- Acquisition of Sybra, Inc.'), all
of the Arby's restaurants were owned and operated by franchisees. As of December
29, 2002, there were 239 company-owned Arby's restaurants and 3,164 Arby's
restaurants were owned by franchisees. As of December 29, 2002, 469 franchisees
operated the 3,164 restaurants, of which 3,011 operated within the United States
and 153 operated outside the United States. Of the domestic restaurants, 264 are
multi-branded locations that sell T.J. Cinnamons products and 42 are
multi-branded locations that sell Pasta Connection products. At December 29,
2002, T.J. Cinnamons gourmet coffees were also sold in approximately 1,182
additional Arby's restaurants. Arby's is not currently offering to sell any
additional Pasta Connection franchises.

    From 1998 to 2002, Arby's system-wide sales grew at a compound annual growth
rate of 4.8% to $2.7 billion. Through December 29, 2002, the Arby's system has
experienced six consecutive years of domestic same store sales growth compared
to the prior year. During 2002, our franchisees opened 116 new Arby's
restaurants and closed 64 Arby's restaurants. In addition, Arby's franchisees
opened 16 T.J. Cinnamons units in Arby's units in 2002. As of December 29, 2002,
franchisees have committed to open 553 Arby's restaurants over the next eight
years. You should read the information contained in 'Risk Factors -- Arby's is
dependent on restaurant revenues and openings;' and ' -- The number of Arby's
restaurants that open may not meet current commitments.'

GENERAL

    As the franchisor of the Arby's restaurant system, Arby's, through its
subsidiaries, licenses the owners and operators of independent businesses to use
the Arby's brand name and trademarks in the operation of Arby's restaurants.
Arby's provides its franchisees with services designed to increase both the
revenue and profitability of their Arby's restaurants. The more important of
these services are providing strategic leadership for the brand, quality control
services, operational training and counseling regarding, and approval of, site
selection.

    Prior to the acquisition of Sybra, the Company and its subsidiaries derived
all their revenues from two principal sources: (i) franchise royalties received
from all Arby's restaurants; and (ii) up-front franchise fees from its
restaurant operators for each new unit opened. As a result of the acquisition of
Sybra, the Company and its subsidiaries will derive a significant portion of
their revenues from sales at company-owned restaurants. Arby's current domestic
franchise royalty rate for new franchises is 4.0%.

    On November 21, 2000, our subsidiary Arby's Franchise Trust completed an
offering of $290 million of 7.44% fixed rate insured notes due 2020 pursuant to
Rule 144A of the Securities Act. As a result of the financing and related
restructuring, Arby's continues to service the franchise agreements relating to
U.S. franchises and a subsidiary services the franchise agreements relating to
Canadian franchises with the assistance of Arby's. In connection with the
financing, Arby's engaged in a corporate restructuring pursuant to which it
formed a wholly-owned Delaware statutory business trust, Arby's Franchise Trust,
which became the franchisor of the Arby's restaurant system in the United States
and Canada. Arby's contributed its U.S. and Canadian franchise agreements,
development agreements, license option agreements and the rights to the revenues
from

4







those agreements to Arby's Franchise Trust. Arby's also formed a new
wholly-owned Delaware statutory business trust, Arby's IP Holder Trust, and
contributed to it all of the intellectual property, including the Arby's
trademark, necessary to operate the Arby's franchise system in the United States
and Canada. Arby's IP Holder Trust has granted Arby's Franchise Trust a 99-year
exclusive license to use such intellectual property. Arby's continues to service
the franchise agreements relating to U.S. franchises, and Arby's of Canada,
Inc., a wholly-owned subsidiary of Arby's, services the franchise agreements
relating to Canadian franchises with the assistance of Arby's. The servicing
functions are performed pursuant to separate servicing agreements with Arby's
Franchise Trust pursuant to which the servicers receive servicing fees from
Arby's Franchise Trust equal to their expenses, subject to a specified cap for
any 12-month period. Any residual cash flow received by Arby's Franchise Trust,
after taking into account all required monthly payments under the notes,
including interest and targeted principal repayments, may be distributed by
Arby's Franchise Trust to Arby's. See Note 10 to our Consolidated Financial
Statements.

ARBY'S RESTAURANTS

    Arby's opened its first restaurant in Youngstown, Ohio in 1964. As of
December 29, 2002, franchisees operated Arby's restaurants in 49 states and five
foreign countries. As of December 29, 2002, the six leading states by number of
operating units were: Ohio, with 267 restaurants; Michigan, with 174
restaurants; Indiana, with 174 restaurants; Texas, with 160 restaurants;
Georgia, with 158 restaurants; and Florida, with 151 restaurants. The country
outside the United States with the most operating units is Canada with 130
restaurants.

    Arby's restaurants in the United States and Canada typically range in size
from 2,500 square feet to 3,000 square feet. Restaurants in other countries
typically are larger than U.S. and Canadian restaurants. At December 29, 2002,
more than 96% of freestanding Arby's restaurants (including more than 96% of the
Company's freestanding Arby's restaurants) feature drive-thru windows.
Restaurants typically have a manager, at least one assistant manager and as many
as 30 full and part-time employees. Staffing levels, which vary during the day,
tend to be heaviest during the lunch hours.

    The following table sets forth the number of Arby's restaurants at the
beginning and end of each year from 2000 to 2002:



                                                      2000       2001       2002
                                                      ----       ----       ----
                                                                   
Restaurants open at beginning of period.........      3,228      3,319      3,351
Restaurants opened during period................        156        131        116
Restaurants closed during period................         65         99         64
                                                      -----      -----      -----
Restaurants open at end of period...............      3,319      3,351      3,403
                                                      -----      -----      -----
                                                      -----      -----      -----


    During the period from January 1, 2000 through December 29, 2002, 403 new
Arby's restaurants were opened and 228 Arby's restaurants (generally,
underperforming restaurants) were closed by franchisees. We believe that closing
underperforming Arby's restaurants has contributed to an increase in the average
annual unit sales volume of the Arby's system, as well as to an improvement of
the overall brand image of Arby's.

    As of December 29, 2002, the Company operated 239 domestic Arby's
restaurants. Of such 239 restaurants, 212 were free-standing units, 14 were
located in shopping malls, eight were in food courts and five were in strip
center locations.

FRANCHISE NETWORK

    Arby's seeks to identify potential franchisees that have experience in
owning and operating quick-service restaurant units, have a willingness to
develop and operate Arby's restaurants and have sufficient net worth. Arby's
identifies applicants through targeted mailings, maintaining a presence at
industry trade shows and conventions, existing customer and supplier contacts
and regularly placed advertisements in trade and other publications. Prospective
franchisees are contacted by an Arby's sales agent and complete an application
for a franchise. As part of the application process, Arby's requires and reviews
substantial documentation, including financial statements and documents relating
to the corporate or other business organization of the applicant. Franchisees
that already operate one or more Arby's restaurants must satisfy certain
criteria in order to be

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eligible to enter into additional franchise agreements, including capital
resources commensurate with the proposed development plan submitted by the
franchisee, a commitment by the franchisee to employ trained restaurant
management and to maintain proper staffing levels, compliance by the franchisee
with all of its existing franchise agreements, a record of operation in
compliance with Arby's operating standards, a satisfactory credit rating and the
absence of any existing or threatened legal disputes with Arby's. The initial
term of the typical 'traditional' franchise agreement is 20 years. Arby's does
not offer any financing arrangements to its franchisees.

    During 2002, Arby's franchisees opened seven new restaurants in one foreign
country and closed seven restaurants in three foreign countries. Arby's also had
territorial agreements with international franchisees in two countries as of
December 29, 2002. Under the terms of these territorial agreements, these
international franchisees have the exclusive right to open Arby's restaurants in
specific regions or countries.

    Arby's offers franchises for the development of both single and multiple
'traditional' restaurant locations. Both new and existing franchisees may enter
into either a master development agreement, which requires the franchisee to
develop two or more Arby's restaurants in a particular geographic area within a
specified time period, or a license option agreement that grants the franchisee
the option, exercisable for a one year period, to build an Arby's restaurant on
a specified site. All franchisees are required to execute standard franchise
agreements. Arby's standard U.S. franchise agreement for new franchises
currently requires an initial $37,500 franchise fee for the first franchised
unit and $25,000 for each subsequent unit and a monthly royalty payment equal to
4.0% of restaurant sales for the term of the franchise agreement. Franchisees
typically pay a $10,000 commitment fee, credited against the franchise fee
during the development process for a new restaurant. Because of lower royalty
rates still in effect under earlier agreements, the average royalty rate paid by
franchisees was approximately 3.3% in 2001 and 3.4% in 2002.

    Franchised restaurants are required to be operated under uniform operating
standards and specifications relating to the selection, quality and preparation
of menu items, signage, decor, equipment, uniforms, suppliers, maintenance and
cleanliness of premises and customer service. Arby's monitors franchisee
operations and inspects restaurants periodically to ensure that company
practices and procedures are being followed.

ADVERTISING AND MARKETING

    Arby's advertises primarily through regional television, radio and
newspapers. Payment for advertising time and space is made by local advertising
cooperatives in which owners of local franchised restaurants and the Company, to
the extent that it owns local company owned restaurants, participate. The
Company and Arby's franchisees contribute 0.7% of net sales of their Arby's
restaurants to the AFA Service Corporation, which produces advertising and
promotional materials for the system. The Company and Arby's franchisees are
also required to spend a reasonable amount, but not less than 3% of monthly net
sales of their Arby's restaurants, for local advertising. This amount is divided
between the individual local market advertising expense and the expenses of a
cooperative area advertising program with the Company operated restaurants and
those franchisees who are operating Arby's restaurants in that area.
Contributions to the cooperative area advertising program are determined by the
participants in the program and are generally in the range of 3% to 5% of
monthly net sales. Arby's and AFA Service Corporation have entered into an
agreement pursuant to which the Arby's system had two flights of national
advertising in 2001, three flights of national advertising in 2002 and will have
an additional three flights of national advertising in 2003. Under the
agreement, Arby's is contributing $8.2 million over the three-year period ($3.1
million of which was expensed in 2002 and $3.1 million of which will be expensed
in 2003) for the eight flights. The Company and Arby's franchisees are also
required to contribute incremental dues to AFA Service Corporation equal to 0.5%
of net sales of their Arby's restaurants (bringing their total contribution to
advertising and marketing to 1.2% of net sales) to help fund the program. In
addition, during the first two years of the program, AFA Service Corporation has
contributed $3.8 million to the program and will contribute an additional $1.6
million to the program in 2003.

PROVISIONS AND SUPPLIES

    Three independent meat processors provide all of Arby's roast beef in the
United States. Franchise operators are required to obtain roast beef from one of
these three approved suppliers. ARCOP, Inc., a non-profit purchasing
cooperative, negotiates contracts with approved suppliers on behalf of the
Company and

6







Arby's franchisees. Arby's believes that satisfactory arrangements could be made
to replace any of the current roast beef suppliers, if necessary, on a timely
basis.

    Franchisees may obtain other products, including food, beverage,
ingredients, paper goods, equipment and signs, from any source that meets Arby's
specifications and approval. Suppliers to the Arby's system must comply with
USDA and USFDA regulations governing the manufacture, packaging, storage,
distribution and sale of all food and packaging products. Through ARCOP, the
Company and Arby's franchisees purchase food, proprietary paper and operating
supplies through national contracts employing volume purchasing. You should read
the information contained in 'Item 1 -- Risk Factors -- Arby's is dependent on
restaurant revenues and openings.'

QUALITY ASSURANCE

    Arby's has developed a quality assurance program designed to maintain
standards and uniformity of the menu selections at each of its franchised
restaurants. Arby's assigns a full-time quality assurance employee to each of
the five independent processing facilities that processes roast beef for Arby's
domestic restaurants. The quality assurance employee inspects the roast beef for
quality and uniformity and to assure compliance with quality and safety
specifications of the United States Department of Agriculture and the United
States Food and Drug Administration. In addition, a laboratory at Arby's
headquarters periodically tests samples of roast beef from franchisees. Each
year, Arby's representatives conduct unannounced inspections of operations of a
number of franchisees to ensure that Arby's policies, practices and procedures
are being followed. Arby's field representatives also provide a variety of
on-site consulting services to franchisees. Arby's has the right to terminate
franchise agreements if franchisees fail to comply with quality standards.

GENERAL

TRADEMARKS

    We own several trademarks that are considered material to our business,
including Arby's'r', T.J. Cinnamons'r', Pasta Connection'r', Arby's Market
Fresh'TM', Market Fresh'r' and Sidekickers'r'.

    Our material trademarks are registered or pending trademarks in the U.S.
Patent and Trademark Office and various foreign jurisdictions. Registrations for
such trademarks in the United States will last indefinitely as long as the
trademark owners continue to use and police the trademarks and renew filings
with the applicable governmental offices. There are no pending challenges to our
right to use any of our material trademarks in the United States.

COMPETITION

    Arby's faces direct and indirect competition from numerous well-established
competitors, including national and regional quick service restaurant chains,
such as McDonald's, Burger King and Wendy's, and quick casual restaurant chains.
In addition, Arby's competes with locally owned restaurants, drive-ins, diners
and other similar establishments. Key competitive factors in the quick service
restaurant industry are price, quality of products, quality and speed of
service, advertising, name identification, restaurant location and
attractiveness of facilities.

    Many of the leading restaurant chains have focused on new unit development
as one strategy to increase market share through increased consumer awareness
and convenience. This has led to increased competition for available development
sites and higher development costs for those sites. This has also led some
competitors to employ other strategies, including frequent use of price
promotions and heavy advertising expenditures. In 2002, there was increased
price competition among national fast food hamburger chains. Although Arby's
experienced an increase in sales in 2002, continued price discounting in the QSR
industry could have an adverse impact on Arby's and the Company.

    Additional competitive pressures for prepared food purchases have come more
recently from operators outside the restaurant industry. Several major grocery
chains have begun offering fully prepared food and meals to go as part of their
deli sections. Some of these chains also have added in-store cafes with service
counters and tables where consumers can order and consume a full menu of items
prepared especially for that portion of the operation.
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    Many of our competitors have substantially greater financial, marketing,
personnel and other resources than we do.

GOVERNMENTAL REGULATIONS

    Various state laws and the Federal Trade Commission regulate Arby's
franchising activities. The Federal Trade Commission requires that franchisors
make extensive disclosure to prospective franchisees before the execution of a
franchise agreement. Several states require registration and disclosure in
connection with franchise offers and sales and have 'franchise relationship
laws' that limit the ability of franchisors to terminate franchise agreements or
to withhold consent to the renewal or transfer of these agreements. Furthermore,
the United States Congress has also considered, and there is currently pending,
legislation governing various aspects of the franchise relationship. In
addition, the Company and Arby's franchisees must comply with the Fair Labor
Standards Act and the Americans with Disabilities Act (the 'ADA'), which
requires that all public accommodations and commercial facilities meet federal
requirements related to access and use by disabled persons, and various state
and local laws governing matters that include, for example, the handling,
preparation and sale of food and beverages, minimum wages, overtime and other
working and safety conditions. Compliance with the ADA requirements could
require removal of access barriers and non-compliance could result in imposition
of fines by the U.S. government or an award of damages to private litigants.
Although we believe that our facilities are substantially in compliance with all
applicable government rules and regulations, including requirements under the
ADA, the Company may incur additional costs to comply with the ADA. However, we
do not believe that any such costs would have a material adverse effect on the
Company's consolidated financial position or results of operations. We cannot
predict the effect on our operations, particularly on our relationship with
franchisees, of any pending or future legislation.

ENVIRONMENTAL MATTERS

    Our past and present operations are governed by federal, state and local
environmental laws and regulations concerning the discharge, storage, handling
and disposal of hazardous or toxic substances. These laws and regulations
provide for significant fines, penalties and liabilities, sometimes without
regard to whether the owner or operator of the property knew of, or was
responsible for, the release or presence of the hazardous or toxic substances.
In addition, third parties may make claims against owners or operators of
properties for personal injuries and property damage associated with releases of
hazardous or toxic substances. We cannot predict what environmental legislation
or regulations will be enacted in the future or how existing or future laws or
regulations will be administered or interpreted. We similarly cannot predict the
amount of future expenditures which may be required to comply with any
environmental laws or regulations or to satisfy any claims relating to
environmental laws or regulations. We believe that our operations comply
substantially with all applicable environmental laws and regulations.
Accordingly, the environmental matters in which we are involved generally relate
either to properties that our subsidiaries own, but on which they no longer have
any operations, or properties that we or our subsidiaries have sold to third
parties, but for which we or our subsidiaries remain liable or contingently
liable for any related environmental costs. Our company-owned Arby's restaurants
have not been the subject of any material environmental matters. Based on
currently available information, including defenses available to us and/or our
subsidiaries, and our current reserve levels, we do not believe that the
ultimate outcome of the environmental matter discussed below or in which we are
otherwise involved will have a material adverse effect on our consolidated
financial position or results of operations. See 'Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operations' below.

    In 2001, a vacant property owned by our indirect subsidiary, Adams Packing
Association, Inc., was listed by the U.S. 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 Packing conducted drum recycling operations at the site from some time
prior to 1971 until the late 1970s. The business operations of Adams Packing
were sold in December 1992. Adams Packing engaged an environmental consultant
that, under the supervision of the Florida Department of Environmental
Protection (the 'FDEP'), conducted an investigation of the site that was
intended to develop additional information on the extent and nature of the soil
and groundwater contamination and the appropriate remediation for that
contamination. Adams Packing's

8







environmental consultant has submitted to the FDEP a summary of the results of
this investigation and Adams Packing and the FDEP have negotiated a work plan
for further investigation of the site and limited remediation of the identified
contamination. The work plan is embodied in a consent order between Adams
Packing and the FDEP. The consent order has been executed by Adams Packing and
the FDEP and is effective, subject to a petition for administrative hearing
being filed during the statutory public comment period. Based on a preliminary
cost estimate of approximately $1.0 million for completion of the work plan,
developed by Adams Packing's environmental consultant, and Adams Packing's
current reserve levels, and after taking into consideration various legal
defenses available to us and/or Adams Packing, the cost of further
investigation and remediation at the site is not expected to have a material
adverse effect on our consolidated financial position or results of operations.
See 'Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources.'

SEASONALITY

    Our consolidated results are not significantly impacted by seasonality,
however, our restaurant franchising royalty revenues and our restaurant sales
are somewhat lower in our first quarter.

EMPLOYEES

    As of December 29, 2002, we had 5,030 employees, including 422 salaried
employees and 4,608 hourly employees. As of December 29, 2002, none of our
employees were covered by a collective bargaining agreement. We believe that
employee relations are satisfactory.

RISK FACTORS

    We wish to caution readers that in addition to the important factors
described elsewhere in this Form 10-K, the following important factors, among
others, sometimes have affected, or in the future could affect, our actual
results and could cause our actual consolidated results during 2003, and beyond,
to differ materially from those expressed in any forward-looking statements made
by us or on our behalf.

    HOLDING COMPANY STRUCTURE.

    Because we are a holding company, our ability to service debt and pay
dividends, including dividends on our common stock, is primarily dependent upon,
in addition to our cash, cash equivalents and short-term investments on hand,
cash flows from our subsidiaries, including loans, cash dividends and
reimbursement by subsidiaries to us in connection with providing certain
management services and payments by subsidiaries under certain tax sharing
agreements.

    Under the terms of the indenture relating to the notes issued in the Arby's
securitization and the agreements relating to debt issued by Sybra, there are
restrictions on the ability of certain of our subsidiaries to pay dividends
and/or make loans or advances to us. The ability of any of our subsidiaries to
pay cash dividends and/or make loans or advances to us is also dependent upon
the respective abilities of such entities to achieve sufficient cash flows after
satisfying their respective cash requirements, including debt service, to enable
the payment of such dividends or the making of such loans or advances. In
addition, in connection with the December 2002 acquisition of Sybra, Triarc
agreed that Sybra would not pay dividends to it for a period of two years from
the closing.

    In addition, our equity interests in our subsidiaries rank junior to all of
the respective indebtedness, whenever incurred, of such entities in the event of
their respective liquidation or dissolution. As of December 29, 2002, our
subsidiaries had aggregate indebtedness of approximately $387 million excluding
intercompany indebtedness.

    WE HAVE BROAD DISCRETION IN THE USE OF OUR SIGNIFICANT CASH, CASH
    EQUIVALENTS AND INVESTMENT POSITION.

    We have not designated any specific use for our significant cash, cash
equivalents and investment position. We are evaluating options for the use of
these funds, including acquisitions, share repurchases and investments.

                                                                               9







We have significant flexibility in selecting the opportunities that we will
pursue. See 'Item 1. Business -- Business Strategy.'

    ACQUISITIONS ARE A KEY ELEMENT OF OUR BUSINESS STRATEGY, BUT WE CANNOT
    ASSURE YOU THAT WE WILL BE ABLE TO IDENTIFY APPROPRIATE ACQUISITION TARGETS
    IN THE FUTURE AND THAT WE WILL BE ABLE TO SUCCESSFULLY INTEGRATE ANY FUTURE
    ACQUISITIONS INTO OUR EXISTING OPERATIONS.

    Acquisitions involve numerous risks, including difficulties assimilating new
operations and products. In addition, acquisitions may require significant
management time and capital resources. We cannot assure you that we will have
access to the capital required to finance potential acquisitions on satisfactory
terms, that any acquisition would result in long-term benefits to us or that
management would be able to manage effectively the resulting business. Future
acquisitions are likely to result in the incurrence of additional indebtedness
or the issuance of additional equity securities.

    WE MAY HAVE TO TAKE ACTIONS THAT WE WOULD NOT OTHERWISE TAKE SO AS NOT TO BE
    DEEMED AN 'INVESTMENT COMPANY.'

    The Investment Company Act of 1940, as amended (the '1940 Act'), requires
the registration of, and imposes various restrictions on, companies that do not
meet certain financial tests regarding the composition of their assets and
source of income. A company may be deemed to be an investment company if it owns
'investment securities' with a value exceeding 40% of its total assets
(excluding government securities and cash items) on an unconsolidated basis or
if more than 45% of the value of its total assets consists of, or more than 45%
of its net after-tax income/loss is derived from, securities of companies it
does not control. Our acquisition strategy may require us to take actions that
we would not otherwise take so as not to be deemed an 'investment company' under
the 1940 Act. Investment companies are subject to registration under, and
compliance with, the 1940 Act unless a particular exclusion or safe harbor
provision applies. Presently, the total amount of investment securities that we
hold is substantially less than 40% of our total assets and substantially less
than 45% of our total assets consist of, and substantially less than 45% of our
net after-tax income/loss is derived from, securities of companies we do not
control. If in the future we were to be deemed an investment company, we would
become subject to the requirements of the 1940 Act. We intend to make
acquisitions and other investments in a manner so as not to be deemed an
investment company. As a result, we may forego investments that we might
otherwise make or retain or dispose of investments or assets that we might
otherwise sell or hold.

    IN THE FUTURE WE MAY HAVE TO TAKE ACTIONS THAT WE WOULD NOT OTHERWISE TAKE
    SO AS NOT TO BE SUBJECT TO TAX AS A 'PERSONAL HOLDING COMPANY.'

    If at any time during the last half of our taxable year, five or fewer
individuals own or are deemed to own more than 50% of the total value of our
shares and if during such taxable year we receive 60% or more of our gross
income from specified passive sources, we would be classified as a 'personal
holding company' for the U.S. federal income tax purposes. If this were the
case, we would be subject to additional taxes at the rate of 38.6% on a portion
of our income, to the extent this income is not distributed to shareholders. We
do not currently expect to have any liability for tax under the personal holding
company rules in 2003. However, we cannot assure you that we will not become
liable for such tax in the future. Because we do not wish to be classified as a
personal holding company or to incur any personal holding company tax, we may be
required in the future to take actions that we would not otherwise take. These
actions may influence our strategic and business decisions, including causing us
to conduct our business and acquire or dispose of investments differently than
we otherwise would.

    OUR SUBSIDIARIES ARE SUBJECT TO VARIOUS RESTRICTIONS, AND SUBSTANTIALLY ALL
    OF THEIR ASSETS ARE PLEDGED, UNDER CERTAIN DEBT AGREEMENTS.

    Under our subsidiaries' debt agreements, substantially all of our
subsidiaries' assets, other than cash, cash equivalents and short-term
investments, are pledged as collateral security. The indenture relating to the
notes issued in the Arby's securitization and the agreements relating to debt
issued by Sybra contain financial covenants that, among other things, require
Arby's Franchise Trust and Sybra, as applicable, to maintain certain

10







financial ratios and restrict their ability to incur debt, enter into certain
fundamental transactions (including sales of all or substantially all of their
assets and certain mergers and consolidations) and create or permit liens. If
either Arby's Franchise Trust or Sybra is unable to generate sufficient cash
flow or otherwise obtain the funds necessary to make required payments of
interest or principal under, or is unable to comply with covenants of, its
respective debt agreements, it would be in default under the terms of such
agreements which would, under certain circumstances, permit the insurer of the
notes issued in the Arby's securitization or the lenders to Sybra, as
applicable, to accelerate the maturity of the balance of its indebtedness. You
should read the information in Note 10 to the Consolidated Financial Statements.

    ARBY'S IS DEPENDENT ON RESTAURANT REVENUES AND OPENINGS.

    Prior to the acquisition of Sybra, the principal source of revenues for our
restaurant business was royalty fees received from franchisees. Following the
acquisition, such royalties and fees will continue to comprise a significant
portion of our revenues and earnings. Our future revenues and earnings will be
highly dependent on the gross revenues of company-owned Arby's restaurants and
of Arby's franchisees' restaurants and the number of Arby's restaurants that we
and Arby's franchisees operate. In addition, it is possible that interruptions
in the distribution of supplies to Arby's restaurants could adversely affect
sales at Company-owned restaurants and result in a decline in royalty fees that
we receive from Arby's franchisees.

    THE LEVEL OF GROSS REVENUES OF ARBY'S RESTAURANTS MAY NOT CONTINUE.

    Competition is intense among national brand franchisors and smaller chains
in the restaurant industry to grow their franchise systems. Arby's restaurants
are generally in competition for customers with franchisees of other national
and regional quick service and quick casual restaurant chains and with locally
owned restaurants. We cannot assure you that the level of gross revenues of
Company-owned restaurants and of restaurants owned by Arby's franchisees, upon
which our royalty fees are dependent, will continue.

    THE NUMBER OF ARBY'S RESTAURANTS THAT OPEN MAY NOT MEET CURRENT COMMITMENTS.

    Numerous factors beyond our control affect restaurant openings. These
factors include the ability of potential restaurant owners to obtain financing,
locate appropriate sites for restaurants and obtain all necessary state and
local construction, occupancy and other permits and approvals. Although as of
December 29, 2002 franchisees had signed commitments to open 553 Arby's
restaurants and have made or are required to make non-refundable deposits of
$10,000 per restaurant, we cannot assure you that these commitments will result
in open restaurants. See 'Item 1. Business -- Business Segment -- Restaurant
Franchising and Operations (Arby's)  -- Franchise Network.' In addition, we
cannot assure you that our franchisees will successfully develop and operate
their restaurants in a manner consistent with our standards.

    ARBY'S FRANCHISE REVENUES DEPEND, TO A SIGNIFICANT EXTENT, ON ITS LARGEST
    FRANCHISEE AND A DECLINE IN ITS REVENUE MAY INDIRECTLY ADVERSELY AFFECT US.

    During 2002, Arby's received approximately 27% of its royalties and
franchise and related fees from RTM Restaurant Group, Inc. ('RTM') (which as of
December 29, 2002, operated 783 Arby's restaurants). Arby's revenues could
decline from their present levels if RTM suffered a significant decline in its
business.

    COMPETITION FROM RESTAURANT COMPANIES COULD ADVERSELY AFFECT US.

    A significant portion of our revenues and earnings comes from restaurant
franchising and operations. The business sectors in which we and Arby's
franchisees compete are highly competitive (e.g., with respect to price, food
quality and presentation, service, location, and the nature and condition of the
financed business unit/location), and are affected by changes in tastes and
eating habits, local, regional and national economic conditions and population
and traffic patterns. Arby's restaurants compete with a variety of locally-owned
restaurants, as well as competitive regional and national chains and franchises.
Moreover, new companies may enter the Company's or a franchisee's respective
market area and target sales audience. Such competition may have, among other
things, lower operating costs, lower debt service requirements, better
locations, better facilities, better management, more effective marketing and
more efficient operations. All such competition

                                                                              11







may adversely affect our revenues and profits or those of Arby's franchisees and
could adversely affect the ability of franchisees to make required payments to
Arby's. Furthermore, we and Arby's franchisees face competition for competent
employees and high levels of employee turnover, which also can have an adverse
effect on our operations and revenues and those of Arby's franchisees and on
franchisees' abilities to make required payments to Arby's. Many of Arby's
competitors have substantially greater financial, marketing, personnel and other
resources than Arby's.

    CHANGES IN CONSUMER TASTES AND PREFERENCES AND IN SPENDING AND DEMOGRAPHIC
    PATTERNS, AS WELL AS HEALTH AND SAFETY CONCERNS ABOUT FOOD QUALITY, COULD
    RESULT IN A LOSS OF CUSTOMERS AND REDUCE THE ROYALTIES THAT WE RECEIVE.

    The quick service restaurant industry is often affected by changes in
consumer tastes, national, regional and local economic conditions, discretionary
spending priorities, demographic trends, traffic patterns and the type, number
and location of competing restaurants. Consumer preferences could also be
affected by health or safety concerns with respect to the consumption of beef,
french fries or other foods or with respect to the effects of food borne
illnesses. As is generally the case in the restaurant franchise business, we and
our franchisees may, from time to time, be the subject of complaints or
litigation from customers alleging illness, injury or other food quality, health
or operational concerns. Adverse publicity resulting from these allegations may
harm the reputation of Arby's restaurants, even if the allegations are not
valid, we are not found liable or those concerns relate only to a single
restaurant or a limited number of restaurants. Moreover, complaints, litigation
or adverse publicity experienced by one or more of our franchisees could also
adversely affect our business as a whole. If Arby's is unable to adapt to
changes in consumer preferences and trends, or we have adverse publicity due to
any of these concerns, we and our franchisees may lose customers and the
resulting revenues from company-owned restaurants and the royalties that Arby's
receives from its franchisees may decline.

    WE MAY NOT BE ABLE TO ADEQUATELY PROTECT OUR INTELLECTUAL PROPERTY, WHICH
    COULD HARM THE VALUE OF OUR BRANDS AND ADVERSELY AFFECT OUR BUSINESS.

    Our intellectual property is material to the conduct of our business. We
rely on a combination of trademarks, copyrights, service marks, trade secrets
and similar intellectual property rights to protect our brands and other
intellectual property. The success of our business strategy depends, in part, on
our continued ability to use our existing trademarks and service marks in order
to increase brand awareness and further develop our branded products in both
domestic and international markets. If our efforts to protect our intellectual
property are not adequate, or if any third party misappropriates or infringes on
our intellectual property, either in print or on the Internet, the value of our
brands may be harmed, which could have a material adverse effect on our
business, including the failure of our brands to achieve and maintain market
acceptance.

    We franchise our restaurant brands to various franchisees. While we try to
ensure that the quality of our brands is maintained by all of our franchisees,
we cannot assure you that these franchisees will not take actions that adversely
affect the value of our intellectual property or the reputation of the Arby's
restaurant system.

    We have registered certain trademarks and have other trademark registrations
pending in the U.S. and certain foreign jurisdictions. The trademarks that we
currently use have not been registered in all of the countries outside of the
United States in which we do business and may never be registered in all of
these countries.

    We cannot assure you that all of the steps we have taken to protect our
intellectual property in the U.S. and foreign countries will be adequate. In
addition, the laws of some foreign countries do not protect intellectual
property rights to the same extent as the laws of the U.S.

    WE REMAIN CONTINGENTLY LIABLE WITH RESPECT TO CERTAIN OBLIGATIONS RELATING
    TO BUSINESSES THAT WE HAVE SOLD.

    As previously reported, in 1997 we sold all of our then company-owned Arby's
restaurants to subsidiaries of RTM, Arby's largest franchisee. In connection
with the sale, an aggregate of approximately $54.7 million of mortgage and
equipment notes were assumed by subsidiaries of RTM, of which approximately
$42.0 million was outstanding at December 29, 2002. RTM has guaranteed the
payment of these notes by its subsidiaries. Notwithstanding the assumption of
this debt and guaranty, we remain contingently liable as a guarantor of the
notes. In addition, the subsidiaries of RTM also assumed substantially all of
the lease obligations relating to the

12







purchased restaurants (which aggregate a maximum of approximately $66.0 million
at December 29, 2002) and RTM has indemnified us for any losses we might incur
with respect to such leases. Notwithstanding such assumption, we remain
contingently liable if RTM's subsidiaries fail to make the required payments
under those leases.

    In addition, in July 1999, the Company sold 41.7% of its remaining 42.7%
interest in National Propane Partners, L.P. and a sub-partnership, National
Propane, L.P. to Columbia Energy Group, and retains less than a 1% special
limited partner interest in AmeriGas Eagle Propane, L.P. (formerly known as
National Propane, L.P. and as Columbia Propane, L.P.). As part of the
transaction, our subsidiary, National Propane Corporation, agreed that while it
remains a special limited partner of AmeriGas, it would indemnify the owner of
AmeriGas for any payments the owner makes under certain debt of AmeriGas
(aggregating approximately $138.0 million as of December 29, 2002), if AmeriGas
is unable to repay or refinance such debt, but only after recourse to the assets
of AmeriGas. Either National Propane Corporation or AmeriGas Propane, L.P., the
owner of AmeriGas, may require AmeriGas to repurchase the special limited
partner interest. However, we believe it is unlikely that either party would
require repurchase prior to 2009 as either AmeriGas Propane, L.P. would owe us
tax indemnification payments or we would accelerate payment of deferred taxes
associated with our sale of the propane business.

    Although the Company believes that it is unlikely that it will be called
upon to make any payments under the guaranty, leases or indemnification
described above, if the Company were required to make such payments it could
have a material adverse effect on the financial position or results of
operations of the Company. You should read the information in 'Item. 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources' and in Note 22 to the
Consolidated Financial Statements.

    CHANGES IN GOVERNMENTAL REGULATION MAY ADVERSELY AFFECT OUR ABILITY TO OPEN
    NEW RESTAURANTS OR OTHERWISE ADVERSELY AFFECT OUR EXISTING AND FUTURE
    OPERATIONS AND RESULTS.

    Each of our restaurants is subject to licensing and regulation by health,
sanitation, safety and other agencies in the state and/or municipality in which
the restaurant is located. There can be no assurance that we will not experience
material difficulties or failures in obtaining the necessary licenses or
approvals for our restaurants which could delay the opening of such restaurants
in the future. In addition, more stringent and varied requirements of local and
tax governmental bodies with respect to zoning, land use and environmental
factors could delay or prevent development of new restaurants in particular
locations. We are also subject to the Fair Labor Standards Act which governs
such matters as minimum wages, overtime and other working conditions, along with
the Americans with Disabilities Act, family leave mandates and a variety of
other laws enacted by the states that govern these and other employment law
matters. We cannot predict the amount of future expenditures which may be
required in order to comply with any changes in existing regulations or to
comply with any future regulations that may become applicable to our business.

    Certain of our current and past operations are or have been subject to
federal, state and local environmental laws and regulations concerning the
discharge, storage, handling and disposal of hazardous or toxic substances. Such
laws and regulations provide for significant fines, penalties and liabilities,
in certain cases without regard to whether the owner or operator of the property
knew of, or was responsible for, the release or presence of such hazardous or
toxic substances. In addition, third parties may make claims against owners or
operators of properties for personal injuries and property damage associated
with releases of hazardous or toxic substances. Although we believe that our
operations comply in all material respects with all applicable environmental
laws and regulations, we cannot predict what environmental legislation or
regulations will be enacted in the future or how existing or future laws or
regulations will be administered or interpreted. We cannot predict the amount of
future expenditures which may be required in order to comply with any
environmental laws or regulations or to satisfy any such claims. See 'Item 1.
Business -- General -- Environmental Matters.'

ITEM 2. PROPERTIES.

    We believe that our properties, taken as a whole, are generally well
maintained and are adequate for our current and foreseeable business needs. We
lease each of our material properties.

                                                                              13







    The following table contains information about our material facilities as of
December 29, 2002:



                                                                                     APPROXIMATE
                                                                                     SQ. FT. OF
              ACTIVE FACILITIES                 FACILITIES--LOCATION    LAND TITLE   FLOOR SPACE
              -----------------                 --------------------    ----------   -----------
                                                                              
Triarc Corporate Headquarters.................  New York, NY              1 leased       30,670*
Triarc Restaurant Group Headquarters..........  Ft. Lauderdale, FL        1 leased       47,300**


- ---------

 * We are currently seeking to sublet approximately 4,600 square feet of this
   space.

** Approximately 1,140 square feet of this space is subleased from Arby's by a
   third party.

    Arby's also owns two and leases five properties which are leased or sublet
principally to franchisees and has a lease for one inactive property. Our other
subsidiaries also own or lease a few inactive facilities and undeveloped
properties, none of which are material to our financial condition or results of
operations.

    At December 29, 2002, Sybra's 239 restaurants were located in the following
states: 75 were in Michigan, 67 in Texas, 39 in Pennsylvania, 21 in Florida, 14
in New Jersey, 10 in Maryland, 8 in Connecticut, 4 in Virginia and 1 in West
Virginia. In addition to its Arby's restaurant locations, Sybra also leases
office space in San Diego, California and New York, New York for its corporate
and executive offices and in Flint, Michigan, Sinking Spring, Pennsylvania,
Plano, Texas and Temple Terrace, Florida for its regional operations centers.

ITEM 3. LEGAL PROCEEDINGS.

    On March 23, 1999, Norman Salsitz, a stockholder of Triarc, filed a
complaint in the United States District Court for the Southern District of New
York against Triarc, Nelson Peltz and Peter May. In an amended complaint filed
in April 2000, Mr. Salsitz purported to assert a claim for alleged violation of
Section 14(e) of the Securities Exchange Act of 1934, as amended, on behalf of
all persons who held our stock as of March 10, 1999. The amended complaint
alleged that our tender offer statement in connection with the 1999 'Dutch
Auction' self-tender offer was materially false and misleading in that, among
other things, it failed to disclose alleged recent valuations of Triarc. The
amended complaint sought damages in an amount to be determined, together with
prejudgment interest, the costs of suit, including attorneys' fees, an order
permitting all shareholders who tendered their shares in the Dutch Auction
Tender Offer to rescind the transaction, and unspecified other relief. On
November 16, 2001, the defendants moved for summary judgment dismissing the
action in its entirety, and the plaintiff moved to certify a class consisting of
all persons or entities who held stock in Triarc as of March 10, 1999 and
allegedly suffered damages thereby. On October 17, 2002, the court denied the
plaintiff's motion for class certification and granted the defendants' motion
for summary judgment, and subsequently entered judgment dismissing the case. On
November 21, 2002, plaintiff filed a notice of appeal to the United States Court
of Appeals for the Second Circuit. On February 28, 2003, the plaintiff withdrew
his appeal.

    In October 1998, various class actions were brought on behalf of our
stockholders in the Court of Chancery of the State of Delaware. These class
actions name Triarc, Messrs. Peltz and May and directors of Triarc as
defendants. On March 26, 1999, four of the plaintiffs in these actions filed an
amended complaint making allegations substantially similar to those asserted in
the Salsitz case described above. In October 2000, the plaintiffs agreed to stay
these actions pending determination of the Salsitz action.

    We believe that the outcome of any of the matters described above or any of
the other matters that have arisen in the ordinary course of our business
(including those arising in the ordinary course of the operation of our
company-owned restaurants) will not have a material adverse effect on our
consolidated financial condition or results of operations.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

    We held an Annual Meeting of Stockholders on June 4, 2002. The matters acted
upon by the stockholders at that meeting were reported in our Quarterly Report
on Form 10-Q for the quarter ended June 30, 2002.

14







PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

    The principal market for our Class A Common Stock is the New York Stock
Exchange ('NYSE') (symbol: TRY). The high and low market prices for our Class A
Common Stock, as reported in the consolidated transaction reporting system, are
set forth below:



                                                           MARKET PRICE
                                                          ---------------
                    FISCAL QUARTERS                        HIGH     LOW
                    ---------------                        ----     ---
                                                             
2001
    First Quarter ended April 1.........................  $26.62   $23.44
    Second Quarter ended July 1.........................   26.40    23.85
    Third Quarter ended September 30....................   26.50    21.80
    Fourth Quarter ended December 30....................   25.10    22.40
2002
    First Quarter ended March 31........................  $28.68   $24.00
    Second Quarter ended June 30........................   28.73    26.50
    Third Quarter ended September 29....................   27.55    22.30
    Fourth Quarter ended December 29....................   28.05    21.98


    We did not pay any dividends on our common stock in 2001, 2002 or in 2003 to
date and do not presently anticipate the declaration of cash dividends on our
Class A Common Stock in the near future. However, the declaration of future
dividends is subject to the discretion of our Board of Directors, which may from
time to time review whether to declare dividends in light of all of the then
existing relevant facts and circumstances. We have no class of equity securities
currently issued and outstanding except for the Class A Common Stock. However,
we are currently authorized to issue up to 100 million shares of Class B Common
Stock and up to 100 million shares of preferred stock.

    Because we are a holding company, our ability to meet our cash requirements,
including required interest and principal payments on our indebtedness, is
primarily dependent upon, in addition to our cash, cash equivalents and
short-term investments on hand, cash flows from our subsidiaries. Under the
terms of the indenture relating to the notes issued in the Arby's securitization
and the agreements related to debt issued by Sybra (see 'Item 1. Business --
Business Segment -- Restaurant Franchising and Operations (Arby's) -- General'
and 'Item 1. Business -- Acquisition of Sybra, Inc.'), the ability of Arby's
and Sybra to pay any dividends or make any loans or advances to us is limited
by the debt service requirements of its subsidiaries. In addition, in connection
with the acquisition of Sybra, Triarc agreed that Sybra would not pay dividends
to it for a period of two years from the closing. You should read the
information in 'Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital Resources' and
Note 10 to our Consolidated Financial Statements.

    On January 18, 2001, our management was authorized, when and if market
conditions warrant, to purchase from time to time up to an aggregate of $50
million worth of our Class A Common Stock pursuant to a $50 million stock
repurchase program that ended on January 18, 2003. During the period from
January 18, 2001 through January 18, 2003, we repurchased 438,500 shares, at an
average cost of approximately $23.89 per share (including commissions), for an
aggregate cost of approximately $10.5 million, pursuant to the stock repurchase
program.

    On January 17, 2003, the stock repurchase program was extended until January
18, 2004 and the amount available under the stock repurchase program was
replenished to permit the Company to repurchase up to a total of $50 million
worth of our Class A Common Stock on or after January 18, 2003 (in addition to
the $10.5 million previously spent under the program). We cannot assure you that
we will repurchase any additional shares pursuant to this stock repurchase
program.

    As of March 15, 2003, there were approximately 3,569 holders of record of
our Class A Common Stock.

                                                                              15











ITEM 6. SELECTED FINANCIAL DATA (1)



                                                            YEAR ENDED(2)
                            ------------------------------------------------------------------------------
                            JANUARY 3,     JANUARY 2,     DECEMBER 31,      DECEMBER 30,      DECEMBER 29,
                               1999           2000            2000              2001              2002
                               ----           ----            ----              ----              ----
                                               (IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
                                                                               
Revenues, investment
  income and other
  income..................   $ 88,964       $102,577       $ 119,406         $  137,146         $ 98,773 (11)
Income (loss) from
  continuing operations
  before income taxes and
  minority interests......      8,019         24,854 (6)       2,211 (8)         17,410(10)      (16,634)
Income (loss) from
  continuing operations...      3,187         17,702 (6)     (10,157)(8)          8,966(10)       (9,757)
Income from discontinued
  operations..............     11,449          4,519         472,078             43,450           11,100
Extraordinary charges.....     --            (12,097)        (20,680)           --                --
Net income................     14,636(5)      10,124 (6)     441,241 (8)         52,416(10)        1,343 (12)
Basic income (loss) per
  share (3):
    Continuing operations..       .11            .68            (.44)               .42             (.48)
    Discontinued operations       .37            .18           20.32               2.02              .54
    Extraordinary charges..    --               (.47)           (.89)           --                --
    Net income............        .48            .39           18.99               2.44              .06
Diluted income (loss) per
  share (3):
    Continuing operations..       .10            .66            (.44)               .40             (.48)
    Discontinued operations       .36            .16           20.32               1.91              .54
    Extraordinary charges.     --               (.45)           (.89)           --                --
    Net income............        .46            .37           18.99               2.31              .06
Working capital...........    180,739        240,399         596,319            556,637          510,438
Total assets..............    462,417        378,424       1,067,424            868,409          968,891
Long-term debt............    279,226          3,792         291,718            288,955          352,700
Stockholders' equity
  (deficit) (4)...........     11,272       (166,726)(7)     282,310 (9)        332,397          332,742
Weighted-average common
  shares outstanding......     30,306         26,015 (7)      23,232             21,532           20,446


- ---------

 (1) Selected Financial Data for the years ended on or prior to the fiscal year
     ended December 31, 2000 reflect the discontinuance of the Company's
     beverage businesses sold in October 2000 and for the years ended on or
     prior to the fiscal year ended January 2, 2000 reflect the discontinuance
     of the Company's propane business sold in July 1999.

 (2) The Company reports on a fiscal year basis consisting of 52 or 53 weeks
     ending on the Sunday closest to December 31. In accordance with this
     method, the Company's 1998 fiscal year contained 53 weeks and each of the
     Company's 1999, 2000, 2001 and 2002 fiscal years contained 52 weeks.

 (3) Basic and diluted income (loss) per share are the same for the fiscal years
     2000 and 2002 since all potentially dilutive securities would have had an
     antidilutive effect based on the loss from continuing operations for each
     of those years. The shares used in the calculation of diluted income (loss)
     per share for the fiscal years 1998 (31,527,000), 1999 (26,943,000) and
     2001 (22,692,000) consist of the weighted average common shares outstanding
     and potential common shares reflecting the effect of dilutive stock options
     of 1,221,000, 818,000 and 1,160,000, respectively, and for the fiscal year
     1999 the effect of a dilutive forward purchase obligation for common stock
     of 110,000 shares.

 (4) The Company has not paid any dividends on its common shares during any of
     the years presented.
                                              (footnotes continued on next page)

16







(footnotes continued from previous page)

 (5) Reflects certain significant credits recorded during fiscal 1998 as
     follows: $7,074,000 credited to net income representing (1) $3,067,000
     included in the income from operations of the discontinued businesses
     consisting of $5,016,000 of gain on sale of businesses less $1,949,000 of
     related income taxes and (2) $4,007,000 of gain on disposal of discontinued
     operations.

 (6) Reflects certain significant charges and credits recorded during fiscal
     1999 as follows: $926,000 credited to income from continuing operations
     before income taxes and minority interests representing $3,052,000 of
     reversal of excess interest expense accruals for interest due the Internal
     Revenue Service (the 'IRS') in connection with the completion of their
     examinations of the Company's Federal income tax returns for prior years
     less a $2,126,000 charge for a capital structure reorganization related
     charge related to equitable adjustments made to the terms of outstanding
     stock options for stock of a former subsidiary held by corporate employees;
     $5,789,000 credited to income from continuing operations representing (1)
     the aforementioned $926,000 credited to income from continuing operations
     before income taxes and minority interests less $264,000 of related income
     taxes and (2) $5,127,000 of release of excess reserves for income taxes in
     connection with the completion of IRS examinations of the Company's Federal
     income tax returns; and $3,897,000 credited to net income representing (1)
     the aforementioned $5,789,000 credited to income from continuing
     operations, (2) $15,102,000 of gain on disposal of discontinued operations,
     less (i) $4,897,000 of charges reported in income from operations of the
     discontinued businesses consisting of (a) a $3,348,000 charge for a capital
     structure reorganization related charge, similar to the charge in
     continuing operations, relating to option holders who were employees of the
     sold businesses, (b) $411,000 of provision for interest due the IRS in
     connection with the completion of their examination of the Company's
     Federal income tax returns, both less $1,464,000 of related income taxes
     and (c) $2,602,000 of provision for income taxes in connection with the
     completion of IRS examinations of the Company's Federal income tax returns
     and (ii) a $12,097,000 extraordinary charge from the early extinguishment
     of debt.

 (7) In fiscal 1999 the Company repurchased for treasury 3,805,015 shares of its
     class A common stock and 1,999,208 shares of class B common stock for an
     aggregate $117,160,000 and recorded a forward purchase obligation for two
     future purchases of class B common stock that occurred on August 10, 2000
     and on August 10, 2001 for $42,343,000 and $43,843,000, respectively. These
     transactions resulted in an aggregate $203,346,000 reduction to
     stockholders' equity in fiscal 1999 resulting in a stockholders' deficit as
     of January 2, 2000 and a reduction of 3,376,000 shares in the
     weighted-average common shares outstanding.

 (8) Reflects certain significant charges and credits recorded during fiscal
     2000 as follows: $36,432,000 charged to income from continuing operations
     before income taxes and minority interests representing (1) a $26,010,000
     charge for capital market transaction related compensation and (2) a
     $10,422,000 charge resulting from the Company's repurchase of 1,045,834
     shares of its class A common stock from certain of the Company's officers
     and a director within six months after exercise of the related stock
     options by the officers and director; $32,914,000 charged to loss from
     continuing operations representing the aforementioned $36,432,000 less
     $3,518,000 of related income tax benefit; and $427,352,000 credited to net
     income representing $480,946,000 of the then estimated gain on disposal of
     the Company's former beverage business credited to income from discontinued
     operations less (1) the aforementioned $32,914,000 charged to loss from
     continuing operations and (2) a $20,680,000 extraordinary charge from the
     early extinguishment of debt.

 (9) The increase in stockholders' equity during fiscal 2000 principally
     reflects net income of $441,241,000 which includes a gain on disposal of
     discontinued operations of $480,946,000.

(10) Reflects certain significant credits recorded during fiscal 2001 as
     follows: $5,000,000 credited to income from continuing operations before
     income taxes and minority interests representing the receipt of a
     $5,000,000 note receivable from the Chairman and Chief Executive Officer
     and the President and Chief Operating Officer (the 'Executives') of the
     Company received in connection with the settlement of a class action
     lawsuit involving certain awards of compensation to the Executives;
     $3,200,000 credited to income from continuing operations representing the
     aforementioned $5,000,000 less $1,800,000 of related income tax expense;
     and $46,650,000 credited to net income representing the aforementioned
     $3,200,000 credited
                                              (footnotes continued on next page)

                                                                              17







(footnotes continued from previous page)

     to income from continuing operations and $43,450,000 of additional gain on
     disposal of the Company's beverage businesses.

(11) Reflects a decline in investment income of $32,781,000 in fiscal 2002
     compared with fiscal 2001.

(12) Reflects a significant credit recorded during fiscal 2002 as follows:
     $11,100,000 credited to net income representing adjustments to the
     previously recognized gain on disposal of the Company's beverage business
     due to the release of reserves for income taxes associated with the
     discontinued beverage operations in connection with the receipt of related
     income tax refunds.



 18










ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS.

INTRODUCTION

    We currently operate in one business, franchising and operating Arby's
restaurants.

    On December 27, 2002, we completed the acquisition of all of the voting
equity interests of Sybra, Inc. from I.C.H. Corporation in a transaction we
refer to as the Sybra Acquisition. The acquisition was under a plan of
reorganization confirmed by a United States Bankruptcy Court for I.C.H. and
Sybra following their filing in February 2002 for protection under Chapter 11 of
the United States Bankruptcy Code in order to restructure their financial
obligations. Sybra owns and operates 239 Arby's restaurants in nine states and,
prior to the Sybra Acquisition, was the second largest franchisee of Arby's
restaurants. We acquired Sybra with the expectation of strengthening and
increasing the value of our Arby's brand. Sybra's results of operations
following the December 27, 2002 date of the Sybra Acquisition through December
29, 2002 have been included in the accompanying consolidated income statement
for the year ended December 29, 2002. The results of operations before income
taxes for that two-day period have been reported in 'Other income, net' for
convenience since the results were not material to our consolidated income
before income taxes.

    As discussed below under 'Liquidity and Capital Resources,' we are presently
evaluating our options for the use of our significant cash, cash equivalent and
investment position, including additional business acquisitions, repurchases of
our common shares and investments.

    Throughout the years presented in this discussion, we derived our revenues
in the form of royalties and franchise and related fees but, as a result of the
Sybra Acquisition, we have also begun deriving revenues from the sales by the
restaurants we now operate which, commencing with fiscal 2003, will be reported
as sales. While the majority of our existing royalty agreements and all of our
new domestic royalty agreements provide for royalties of 4% of franchise
revenues, our average rate was 3.4% in fiscal 2002. We also derive investment
income from our investments.

    We incur general and administrative expenses, depreciation and amortization
and interest expense, but no cost of sales, in our restaurant franchising
operations. In addition, we incur general corporate expenses, including
investment activity related expenses, in those same expense categories. As a
result of the Sybra Acquisition we will also report cost of sales and
advertising and selling expenses commencing with fiscal 2003. Recently we have
not had significant capital expenditures; however, as a result of the Sybra
Acquisition, we will increase capital expenditures to support our recently
acquired company-owned restaurants.

    We previously operated in the premium beverage and soft drink concentrate
businesses. On October 25, 2000 we completed the sale of these businesses, which
we refer to as the Snapple Beverage Sale, of Snapple Beverage Group, Inc., the
parent company of Snapple Beverage Corp., Mistic Brands, Inc. and Stewart's
Beverages, Inc., and Royal Crown Company, Inc. to affiliates of Cadbury
Schweppes plc, which we refer to as Cadbury. The premium beverage and soft drink
concentrate businesses, formerly reported as business segments, have been
accounted for as discontinued operations in 2000 through the date of sale.

    In recent years our restaurant business has experienced the following
trends:

         Continued growth of food consumed away from home as a percentage of
         total food-related spending;

         Increases in the cost and overall difficulty of developing new units in
         many areas of the country, primarily as a result of increased
         competition among quick service restaurant competitors for available
         development sites, higher development costs associated with those sites
         and continued tightening in the lending markets typically used to
         finance new unit development;

         Increased price competition in the quick service restaurant industry,
         particularly as evidenced by the value menu concept which offers
         comparatively lower prices on some menu items, the combination meals
         concept which offers a combination meal at an aggregate price lower
         than the individual food and beverage items, couponing and other price
         discounting;

         The continuing proliferation of competitors in the higher end of the
         sandwich category, many of whom are competing with Arby's by offering
         higher priced sandwiches with perceived higher levels of freshness,
         quality and customization;
                                                                              19







         Additional competitive pressures for prepared food purchases from
         operators outside the quick service restaurant industry such as deli
         sections and in-store cafes of several major grocery store chains,
         convenience stores and casual dining outlets; and

         The addition of selected higher-priced quality items to menus, which
         appeal more to adult tastes and offer an opportunity to recover some of
         the dollar margins lost in the discounting of other menu items.

    We have experienced the effects of these trends to the extent they affect
sales by our franchisees and, accordingly, impact the royalties and franchise
fees we receive from them. Effective December 27, 2002 we also experienced these
effects directly to the extent they affect the operations of our recently
acquired restaurants.

PRESENTATION OF FINANCIAL INFORMATION

    This 'Management's Discussion and Analysis of Financial Condition and
Results of Operations' of Triarc Companies, Inc., which we refer to as Triarc,
and its subsidiaries should be read in conjunction with our consolidated
financial statements included elsewhere herein. Certain statements we make under
this Item 7 constitute 'forward-looking statements' under the Private Securities
Litigation Reform Act of 1995. See 'Special Note Regarding Forward-Looking
Statements and Projections' in 'Part I' preceding 'Item 1.'

    We report on a fiscal year consisting of 52 or 53 weeks ending on the Sunday
closest to December 31. Each of our 2000, 2001 and 2002 fiscal years contained
52 weeks. Our 2000 fiscal year commenced on January 3, 2000 and ended on
December 31, 2000, our 2001 fiscal year commenced on January 1, 2001 and ended
on December 30, 2001, and our 2002 fiscal year commenced on December 31, 2001
and ended on December 29, 2002. When we refer to '2000' we mean the period from
January 3, 2000 to December 31, 2000; when we refer to '2001' we mean the period
from January 1, 2001 to December 30, 2001; and when we refer to '2002' we mean
the period from December 31, 2001 to December 29, 2002.

    Certain amounts presented in this 'Management's Discussion and Analysis of
Financial Condition and Results of Operations' for 2000 and 2001 have been
reclassified to conform with the current year's presentation.

20







RESULTS OF OPERATIONS

    Set forth below is a table that summarizes our results of operations and
compares the amount and percent of the change between (1) 2000 and 2001, which
we refer to as the 2001 Change, and (2) 2001 and 2002, which we refer to as the
2002 Change. We consider certain percentage changes between years to be not
measurable or not meaningful, and we refer to these as 'n/m.' The percentage
changes used in the following discussion have been rounded to the nearest whole
percentage.



                                                                   2001 CHANGE         2002 CHANGE
                                                                -----------------   -----------------
                                      2000     2001     2002    AMOUNT    PERCENT   AMOUNT    PERCENT
                                      ----     ----     ----    ------    -------   ------    -------
                                                      (IN MILLIONS EXCEPT PERCENTS)
                                                                         
Revenues, investment income and
  other income:
    Royalties and franchise and
      related fees.................  $ 87.4   $ 92.8   $ 97.8   $   5.4       6 %   $   5.0       5 %
    Investment income, net.........    30.7     33.6      0.8       2.9       9 %     (32.8)    (97)%
    Gain (loss) on sale of
      businesses...................      --      0.5     (1.2)      0.5     n/m        (1.7)    n/m
    Other income, net..............     1.3     10.2      1.4       8.9     n/m        (8.8)    (87)%
                                     ------   ------   ------   -------             -------
        Total revenues, investment
          income and other income..   119.4    137.1     98.8      17.7      15 %     (38.3)    (28)%
                                     ------   ------   ------   -------             -------
Costs and expenses:
    General and administrative.....    80.5     77.4     75.9      (3.1)     (4)%      (1.5)     (2)%
    Depreciation and amortization,
      excluding amortization of
      deferred financing costs.....     5.3      6.5      6.6       1.2      22 %       0.1       1 %
    Capital market transaction
      related compensation.........    26.0       --       --     (26.0)    n/m          --      --
    Interest expense...............     4.8     30.4     26.2      25.6     n/m        (4.2)    (14)%
    Insurance expense related to
      long-term debt...............     0.6      4.8      4.5       4.2     n/m        (0.3)     (6)%
    Costs of proposed business
      acquisitions not consummated.      --      0.6      2.2       0.6     n/m         1.6     n/m
                                     ------   ------   ------   -------             -------
        Total costs and expenses...   117.2    119.7    115.4       2.5       2 %      (4.3)     (4)%
                                     ------   ------   ------   -------             -------
            Income (loss) from
              continuing operations
              before income taxes
              and minority
              interests............     2.2     17.4    (16.6)     15.2     n/m       (34.0)    n/m
Benefit from (provision for) income
  taxes............................   (12.4)    (8.7)     3.3       3.7     n/m        12.0     n/m
Minority interests in loss of a
  consolidated subsidiary..........      --      0.3      3.5       0.3     n/m         3.2     n/m
                                     ------   ------   ------   -------             -------
            Income (loss) from
              continuing operations   (10.2)     9.0     (9.8)     19.2     n/m       (18.8)    n/m
Income from discontinued
  operations.......................   472.1     43.4     11.1    (428.7)    n/m       (32.3)    n/m
                                     ------   ------   ------   -------             -------
            Income before
              extraordinary charges   461.9     52.4      1.3    (409.5)    n/m       (51.1)    n/m
Extraordinary charges..............   (20.7)      --       --      20.7     n/m          --     n/m
                                     ------   ------   ------   -------             -------
            Net income.............  $441.2   $ 52.4   $  1.3   $(388.8)    n/m     $ (51.1)    n/m
                                     ------   ------   ------   -------             -------
                                     ------   ------   ------   -------             -------


2002 COMPARED WITH 2001

Royalties and Franchise and Related Fees

    Our royalties and franchise and related fees, which were generated entirely
from our restaurant business, increased $5.0 million, or 5%, to $97.8 million in
2002 from $92.8 million in 2001 reflecting a $5.7 million, or 6%, increase in
royalties partially offset by a $0.7 million, or 17%, decrease in franchise and
related fees. The increase in royalties consisted of (1) a $3.3 million
improvement resulting from the royalties from the 116

                                                                              21







restaurants opened in 2002, with generally higher than average sales volumes,
replacing the royalties from the 64 generally underperforming restaurants closed
in 2002, (2) a $1.7 million improvement due to a 2% increase in same-store sales
of franchised restaurants and (3) a $0.7 million improvement due to an increase
in the average royalty rate to 3.4% in 2002 from 3.3% in 2001. The decrease in
franchise and related fees was principally due to a decrease in the amount of
revenues recognized from forfeited deposits upon the termination of commitments
to open new franchised restaurants and the opening of 15 fewer franchised
restaurants in 2002 compared with 2001, partially offset by an increase in
franchise license renewal fees and a decrease in franchise fee credits earned by
franchisees under our remodeling incentive program.

    During the fourth quarter of 2002, we experienced a 3% decline in the
same-store sales of franchised restaurants and, based on early results, this
trend appears to be continuing into the first quarter of 2003. We believe this
decline is affected by the adverse effects of worse weather conditions, price
discounting in the quick service restaurant industry, the generally sluggish
economy and for the fourth quarter of 2002, strong same-store sales comparisons.
During the balance of 2003, we intend to continue Arby's national cable
television advertising with a new campaign and introduce new operational,
product and marketing initiatives which we expect will favorably impact the
trend of same-store sales.

    Our royalties and franchise fees have no associated cost of sales. However,
commencing in 2003 we will report net sales and related cost of sales due to the
Sybra Acquisition. Included in royalties and franchise and related fees in 2002
and 2001 are $7.5 million and $7.4 million, respectively, of franchise revenues
from Sybra prior to the Sybra Acquisition. Franchise revenues from Sybra will no
longer be included in our consolidated results of operations in future periods
but instead Sybra's results of operations will be included in our future
consolidated operating results.

Investment Income, Net

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



                                                            2001     2002    CHANGE
                                                            ----     ----    ------
                                                                 (IN MILLIONS)
                                                                    
Interest income...........................................  $31.8   $ 10.9   $(20.9)
Other than temporary unrealized losses....................   (3.5)   (14.5)   (11.0)
Recognized net gains......................................    5.0      2.7     (2.3)
Distributions, including dividends........................    1.2      2.1      0.9
Investment management and performance fees................   (1.0)    (0.4)     0.6
Other.....................................................    0.1     --       (0.1)
                                                            -----   ------   ------
                                                            $33.6   $  0.8   $(32.8)
                                                            -----   ------   ------
                                                            -----   ------   ------


    The decrease in interest income is due to lower average interest rates and,
to a lesser extent, lower average amounts of cash equivalents and
interest-bearing short-term investments during 2002 compared with 2001. Average
rates on our interest-bearing investments declined from 4.8% in 2001 to 1.8% in
2002 principally due to the general decline in the money market and short-term
interest rate environment which has continued into 2003. The average amount of
our interest-bearing investments declined principally due to our payment in
mid-March 2001 of $239.3 million of estimated income taxes related to the
Snapple Beverage Sale in October 2000. Our recognized net gains and other than
temporary unrealized losses are dependent upon the underlying economics and/or
volatility in the value of our investments in available-for-sale securities and
cost basis investments and/or the timing of the sales of those investments.
Accordingly, our recognized net gains and our other than temporary unrealized
losses presented in the above table may not recur in future periods.

    As of December 29, 2002, we had pretax unrealized holding gains and (losses)
on available-for-sale marketable securities of $1.2 million and $(1.0) million,
respectively, included in accumulated other comprehensive deficit. Should either
(1) we decide to sell any of these investments or (2) any of the unrealized
losses continue such that we believe they have become other than temporary, we
would recognize the gains or losses on the related investments at that time. In
addition, through 280 BT Holdings LLC, a 57.4%-owned consolidated subsidiary, we
hold a $1.7 million cost basis investment in Scientia Health Group Limited, an
entity which we refer to as Scientia, representing original cost less
adjustments for unrealized losses in investments made by Scientia that were
deemed to be other than temporary of $3.3 million during 2002. Such

22







amounts have been effectively reduced by minority interests of $0.7 million and
$1.4 million, respectively. In addition, as of December 29, 2002 we have $0.8
million of non-recourse notes receivable from management officers and employees
relating to a portion of their investments in 280 BT Holdings, less an allowance
of $0.4 million for uncollectible amounts. If the value of the investments of
280 BT Holdings decline further and, accordingly, we recognize additional other
than temporary losses, we would also provide additional allowances relating to
the non-recourse notes receivable in 'General and administrative' expenses.

Gain (Loss) on Sale of Businesses

    The loss on sale of businesses of $1.2 million in 2002 represents a
reduction of a gain related to a business previously sold due to a charge for
estimated environmental clean-up and related costs. The gain on sale of
businesses of $0.5 million in 2001 reflects the release of sales tax accruals no
longer necessary due to the expiration of statutory audit periods. These
accruals were originally provided as a component of the loss on sale of all the
355 then company-owned restaurants in 1997.

Other Income, Net

    The following table summarizes and compares the major components of other
income, net:



                                                              2001    2002    CHANGE
                                                              ----    ----    ------
                                                                  (IN MILLIONS)
                                                                     
Interest income related to the Snapple Beverage Sale.......  $  8.3   $--     $(8.3)
Reduction in the fair value of the liability for a written
  call option on our stock.................................     0.8    --      (0.8)
Other interest income......................................     0.4     0.3    (0.1)
Equity in (losses) earnings of investees, other than
  investment limited partnerships and similar investment
  entities.................................................    (0.2)    0.3     0.5
Other......................................................     0.9     0.8    (0.1)
                                                             ------   -----   -----
                                                             $ 10.2   $ 1.4   $(8.8)
                                                             ------   -----   -----
                                                             ------   -----   -----


    Other income, net decreased $8.8 million principally due to $8.3 million of
interest income recorded in 2001 which did not recur in 2002 related to our
election in June 2001 to treat certain portions of the Snapple Beverage Sale as
an asset sale for income tax purposes, as explained in more detail under
'Discontinued Operations.' The written call option on our common stock relates
to the right of Cadbury to have caused us to issue our common stock upon
conversion of our zero coupon convertible debentures that had been assumed by
Cadbury. Cadbury called the debentures for redemption in full with a redemption
date of February 9, 2003, and the written call option terminated without any of
our common stock being called under the option. The $0.5 million increase in
equity in (losses) earnings of investees, other than investment limited
partnerships and similar investment entities, was primarily attributable to the
$0.3 million of equity in earnings of Encore Capital Group, Inc., formerly MCM
Capital Group, Inc., which we refer to as Encore, in 2002 compared with equity
in losses of Encore of less than $0.1 million in 2001 as Encore returned to
profitability in 2002. We own 7.2% of the issued and outstanding common stock of
Encore and 17.5% of convertible preferred stock of Encore. If all of the
convertible preferred stock were converted, the Company's ownership in Encore
common stock would increase to 13.1%.

General and Administrative

    Our general and administrative expenses decreased $1.5 million, or 2%,
principally reflecting (1) a $5.3 million decrease in incentive compensation
costs, (2) a $0.7 million decrease in legal fees, (3) a $0.6 million decrease in
the provision for doubtful accounts due to the realization in 2002 of
collections on two fully-reserved notes from franchisees and (4) a $0.5 million
decrease in deferred compensation expense. The $5.3 million decrease in
incentive compensation was principally due to lower executive bonuses relating
to 2002 as compared with 2001. Deferred compensation expense of $1.4 million in
2002 and $1.9 million in 2001 represents the increase in the fair value of
investments in two deferred compensation trusts, which we refer to as the
Trusts, for the benefit of our Chairman and Chief Executive Officer and
President and Chief Operating Officer, whom we refer to as the Executives, as
explained in more detail below under 'Income (Loss) From

                                                                              23







Continuing Operations Before Income Taxes and Minority Interests.' These
decreases were partially offset by (1) a $5.0 million reduction in compensation
expense in 2001 which did not recur in 2002 related to a note that we received
from the Executives in partial settlement of a class action shareholder lawsuit
which effectively represented an adjustment of prior period compensation expense
and (2) an increase of $1.1 million in insurance costs principally reflecting
higher premiums.

Depreciation and Amortization, Excluding Amortization of Deferred Financing
Costs

    Our depreciation and amortization, excluding amortization of deferred
financing costs, in total was relatively unchanged at $6.6 million in 2002
compared with $6.5 million in 2001.

Interest Expense

    Interest expense decreased $4.2 million, or 14%, principally reflecting
(1) interest of $3.1 million recorded in 2001 which did not recur in 2002 on the
estimated income tax liability paid with the filing of our election in June 2001
to treat certain portions of the Snapple Beverage Sale as an asset sale for
income tax purposes, as explained below under 'Discontinued Operations,' and (2)
a $1.4 million decrease in interest expense due to lower outstanding balances of
our 7.44% insured non-recourse securitization notes, which we refer to as the
Securitization Notes. These decreases were partially offset by a $0.6 million
increase in interest expense due to the full period effect in 2002 of a term
loan and related interest rate swap agreement used to finance the purchase of an
airplane in July 2001.

Insurance Expense Related to Long-Term Debt

    Insurance expense related to long-term debt decreased $0.3 million, or 6%,
to $4.5 million in 2002 from $4.8 million in 2001 due to lower outstanding
balances of the Securitization Notes.

Costs of Proposed Business Acquisitions Not Consummated

    The $2.2 million of costs of proposed business acquisitions not consummated
in 2002 were primarily for a business acquisition proposal which was not
accepted. The $0.6 million of costs in 2001 were for other proposed business
acquisitions not consummated.

Income (Loss) From Continuing Operations Before Income Taxes and Minority
Interests

    Our income (loss) from continuing operations before income taxes and
minority interests decreased $34.0 million to a loss of $16.6 million in 2002
from income of $17.4 million in 2001 due to the effect of the variances
explained in the captions above.

    As disclosed above, we recognized $1.9 million in 2001 and $1.4 million in
2002 of deferred compensation expense for the increase in the fair value of the
investments in the Trusts. Under accounting principles generally accepted in the
United States of America, we recognized investment income of $0.2 million on the
investments in the Trusts in 2001, but were not permitted to recognize any
investment income on the investments in the Trusts in 2002. This disparity
between compensation expense and investment income recognized will reverse in
the future periods as either (1) the investments in the Trusts are sold and
previously unrealized gains are recognized without any offsetting increase in
compensation expense or (2) the fair values of the investments in the Trusts
decrease resulting in the recognition of a reduction of deferred compensation
expense without any offsetting losses recognized in investment income.

Income Taxes

    The benefit from and provision for income taxes represented effective rates
of 20% in 2002 and 50% in 2001 on the respective loss or income from continuing
operations before income taxes and minority interests. The effective benefit
rate in 2002 is lower than the United States Federal statutory rate of 35%
principally due to (1) the tax provision related to minority interests in loss
of a consolidated subsidiary, which is not included in income or loss from
continuing operations before income taxes and minority interests, (2) the state
income taxes, net of Federal income tax benefit, of the consolidated entities
due to the differing mix of pretax income
24







or loss among the consolidated entities which file state tax returns on an
individual company basis and (3) the effect of non-deductible compensation
costs. The effective provision rate in 2001 was higher than the 35% rate
principally due to (1) the effect of non-deductible compensation costs and
(2) state income taxes, both of which had a greater effect in 2001 compared with
2002.

Minority Interests in Loss of a Consolidated Subsidiary

    The minority interests in loss of a consolidated subsidiary of $3.5 million
in 2002 and $0.3 million in 2001 principally reflect provisions for unrealized
losses by 280 BT Holdings on its cost basis investments deemed to be other than
temporary.

Discontinued Operations

    Income from discontinued operations, which resulted entirely from
adjustments to the previously recognized gain on the Snapple Beverage Sale, was
$11.1 million in 2002 compared with $43.4 million in 2001. The adjustment to the
gain in 2002 was due to the release of reserves for income taxes associated with
the discontinued beverage operations in connection with the receipt of related
income tax refunds. The adjustment to the gain in 2001 resulted from the
realization of $200.0 million of proceeds from Cadbury for our electing in June
2001 to treat certain portions of the Snapple Beverage Sale as an asset sale in
lieu of a stock sale under the provisions of Section 338(h)(10) of the United
States Internal Revenue Code, net of estimated income taxes, partially offset by
additional accruals relating to the Snapple Beverage Sale.

2001 COMPARED WITH 2000

Royalties and Franchise and Related Fees

    Our royalties and franchise and related fees, which were generated entirely
from our restaurant business, increased $5.4 million, or 6%, to $92.8 million in
2001 from $87.4 million in 2000 reflecting a $5.3 million, or 6%, increase in
royalties and a $0.1 million, or 2%, increase in franchise and related fees. The
increase in royalties consisted of (1) a $3.9 million improvement resulting from
the royalties from the 131 restaurants opened in 2001, with generally higher
than average sales volume, replacing the royalties from the 99 generally
underperforming restaurants closed in 2001, (2) a $1.2 million improvement due
to a 2% increase in same-store sales of franchised restaurants and (3) a $0.2
million improvement due to a higher average royalty rate. The slight increase in
franchise and related fee revenue was principally due to (1) an increase in fees
from franchise license transfers and franchisee training and (2) an increase in
revenues recognized from forfeited deposits upon the termination of commitments
to open new franchised restaurants, both substantially offset by a decrease in
franchise fee revenue principally due to the opening of 25 fewer franchised
restaurants in 2001 compared with 2000.

    Our royalties and franchise fees have no associated cost of sales.

Investment Income, Net

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



                                                             2000    2001    CHANGE
                                                             ----    ----    ------
                                                                 (IN MILLIONS)
                                                                    
Interest income............................................  $16.5   $31.8   $15.3
Other than temporary unrealized losses.....................   (3.7)   (3.5)    0.2
Recognized net gains.......................................   17.2     5.0   (12.2)
Distributions, including dividends.........................    1.6     1.2    (0.4)
Investment management and performance fees.................   (0.8)   (1.0)   (0.2)
Other......................................................   (0.1)    0.1     0.2
                                                             -----   -----   -----
                                                             $30.7   $33.6   $ 2.9
                                                             -----   -----   -----
                                                             -----   -----   -----


    The increase in interest income was due to higher average amounts of cash
equivalents and short-term investments in 2001 compared with 2000 as a result of
the full year effect in 2001 of the cash provided from
                                                                              25







the Snapple Beverage Sale and $277.0 million of proceeds, net of $13.0 million
of expenses, from the issuance of the Securitization Notes on November 21, 2000.
The decrease in recognized net gains on our investments includes $10.3 million
which was attributable to our gain on the sale of one particular common stock
investment in 2000 which did not recur in 2001.

Gain on Sale of Businesses

    The gain on sale of businesses of $0.5 million in 2001 reflects the release
of sales tax accruals no longer necessary as previously discussed in more detail
in the comparison of 2002 and 2001. There was no gain on sale of businesses
included in continuing operations in 2000.

Other Income, Net

    The following table summarizes and compares the major components of other
income, net:



                                                             2000    2001    CHANGE
                                                             ----    ----    ------
                                                                 (IN MILLIONS)
                                                                    
Interest income related to the Snapple Beverage Sale.......  $--     $ 8.3   $ 8.3
Equity in losses of investees, other than investment
  limited partnerships and similar investment entities.....   (2.3)   (0.2)    2.1
Reduction in the fair value of the liability for a written
  call option on our stock.................................    0.7     0.8     0.1
Settlement of bankruptcy claims with a former affiliate
  previously written off...................................    0.9    --      (0.9)
Other interest income......................................    0.7     0.4    (0.3)
Other......................................................    1.3     0.9    (0.4)
                                                             -----   -----   -----
                                                             $ 1.3   $10.2   $ 8.9
                                                             -----   -----   -----
                                                             -----   -----   -----


    Other income, net, increased $8.9 million principally due to (1) $8.3
million of interest income recorded in 2001, which did not occur in 2000,
related to our election to treat certain portions of the Snapple Beverage Sale
as an asset sale for income tax purposes, as previously discussed in more detail
in the comparison of 2002 and 2001 and (2) a $2.1 million decrease in our equity
in the losses of investees other than investment limited partnerships and
similar investment entities accounted for under the equity method, principally
due to $1.8 million of equity in the write-down of certain assets by an investee
in 2000 which did not recur in 2001. These increases were partially offset by
the non-recurring collection in 2000 of $0.9 million of a receivable from a
former affiliate which was written off in years prior to 2000 due to the former
affiliate filing for bankruptcy protection.

General and Administrative

    Our general and administrative expenses decreased $3.1 million, or 4%,
reflecting (1) an $11.4 million decrease in stock option compensation costs due
to costs incurred in 2000 which did not recur in 2001 consisting of (a) $10.4
million resulting from our repurchase of class A common stock from certain
officers and a director within six months after the exercise of related stock
options by such officers and director and (b) $1.0 million resulting from other
stock option activity relating to the Snapple Beverage Sale, (2) a $5.0 million
reduction in compensation expense related to a note receivable from the
Executives that we received in 2001, as previously explained in more detail in
the comparison of 2002 and 2001, (3) provisions of $1.2 million in 2000 which
did not recur in 2001 for costs to support a change in distributors of food and
other products for a majority of franchisees in our restaurant franchising
operations and (4) a $1.2 million decrease in charitable contributions in 2001.
These decreases were partially offset by (1) higher incentive compensation costs
of $5.0 million under our executive bonus plan principally reflecting the
positive impact of the Snapple Beverage Sale on our capitalization, (2) a $2.5
million increase in insurance expense due to (a) a $1.5 million reduction of
insurance expense recognized in 2000 which did not recur in 2001 relating to the
favorable settlement of insurance claims by the purchaser of a former insurance
subsidiary that we sold in 1998 resulting in the collection of a $1.5 million
note receivable that we received as a portion of the sales proceeds which was
fully reserved at the time of sale and (b) a $1.0 million increase in insurance
premiums in 2001, (3) $2.1 million of

26







expenses in connection with an Arby's national cable television advertising
campaign introduced in 2001, (4) $1.9 million of deferred compensation
expense recognized in 2001 representing the increase in the fair value of
investments in the Trusts for the benefit of the Executives, as previously
explained in more detail in the comparison of 2002 and 2001 under 'Income (Loss)
from Continuing Operations Before Income Taxes and Minority Interests' and (5)
other general increases. The $1.5 million gain in 2000 from realization of the
note receivable discussed above was included as a reduction of general and
administrative expenses since the gain effectively represented an adjustment of
prior period insurance reserves.

Depreciation and Amortization, Excluding Amortization of Deferred Financing
Costs

    Our depreciation and amortization, excluding amortization of deferred
financing costs, increased $1.2 million, or 22%, principally reflecting (1) a
$0.5 million increase in depreciation related to an airplane that was placed in
service in September 2001 which replaced fractional interests in two airplanes
under timeshare agreements which were terminated and (2) a $0.5 million increase
in amortization related to leasehold improvements completed during the 2001
second quarter.

Capital Market Transaction Related Compensation

    The capital market transaction related compensation charge of $26.0 million
in 2000 resulted from incentive compensation costs directly related to the
completion of the Snapple Beverage Sale and the issuance of our Securitization
Notes. This compensation consisted of an aggregate of $22.5 million to the
Executives which was invested in the Trusts for their benefit in January 2001
and $3.5 million paid to other officers and employees in January 2001. There was
no similar charge in 2001.

Interest Expense

    Interest expense increased $25.6 million to $30.4 million in 2001 primarily
reflecting (1) $18.5 million of additional interest in 2001 on our
Securitization Notes and $1.9 million of additional amortization of related
deferred financing costs, due to the full year effect on interest expense in
2001 of the Securitization Notes which were issued on November 21, 2000,
(2) interest of $3.1 million for the period from March 15, 2001 through June 14,
2001 on the estimated income tax liability paid with the filing of our election
in June 2001 to treat certain portions of the Snapple Beverage Sale as an asset
sale for income tax purposes as previously explained in more detail in the
comparison of 2002 and 2001 under 'Discontinued Operations' and (3) interest of
$1.3 million in connection with a term loan and a related interest rate swap
agreement used to finance the purchase of an airplane in July 2001.

Insurance Expense Related to Long-Term Debt

    Insurance expense related to long-term debt increased $4.2 million to $4.8
million in 2001 reflecting increased charges relating to the full year effect in
2001 of insuring the payment of principal and interest on the Securitization
Notes which were issued on November 21, 2000.

Income from Continuing Operations Before Income Taxes and Minority Interests

    Our income from continuing operations before income taxes and minority
interests increased $15.2 million to $17.4 million in 2001 due to the effect of
the variances explained in the captions above.

Income Taxes

    The provision for income taxes represented effective rates of 50% in 2001
and 559% in 2000. The effective rate is unusually high in 2000 principally due
to the relatively low amount of pretax income and the effect thereon of
non-deductible compensation costs. The effective rate is lower in 2001, but
still exceeds the United States Federal statutory rate of 35%, principally due
to (1) the effect of non-deductible compensation costs, which were significantly
lower in 2001 compared with 2000, and (2) the effect of state income taxes,
which was lower in 2001 compared with 2000, due to the differing mix of pretax
income or loss among the consolidated entities which file state tax returns on
an individual company basis.

                                                                              27








Minority Interests in Loss of a Consolidated Subsidiary

    The minority interests in loss of a consolidated subsidiary was $0.3 million
in 2001 as previously explained in more detail in the comparison of 2002 and
2001. In 2000 this consolidated subsidiary had no income or loss and,
accordingly, no minority interests.

Discontinued Operations

    Income from discontinued operations was $43.4 million in 2001 compared with
$472.1 million in 2000. The 2001 income from discontinued operations resulted
entirely from adjustments to the previously recognized estimated gain on the
Snapple Beverage Sale as previously explained in more detail in the comparison
of 2002 and 2001. The 2000 income from discontinued operations consisted of the
then estimated gain on disposal of the discontinued beverage businesses of
$481.0 million less the loss from operations of the discontinued businesses of
$8.9 million through the October 25, 2000 Snapple Beverage Sale.

    Revenues and other income of the beverage businesses were $681.0 million in
2000 through the October 25, 2000 Snapple Beverage Sale reflecting in part the
impact of the acquisition of two premium beverage distributors on February 26,
1999 and January 2, 2000. The beverage businesses generated a net loss of $8.9
million in 2000 through the October 25, 2000 Snapple Beverage Sale principally
reflecting the negative impact of operating costs and expenses associated with
the acquisition of the two premium beverage distributors referred to above and
interest expense related to additional borrowings and the effect of an
increasing interest rate environment on the variable-rate debt of our beverage
businesses.

Extraordinary Charges

    The extraordinary charges of $20.7 million in 2000 resulted from the early
assumption by Cadbury or extinguishment by us, as applicable, of (1) borrowings
under a senior bank credit facility maintained by Snapple, Mistic, Stewart's,
Royal Crown and RC/Arby's Corporation, the former parent company of Royal Crown
and Arby's, Inc., (2) 10 1/4% senior subordinated notes due 2009 co-issued by
Snapple Beverage Group and Triarc Consumer Products Group, LLC, a subsidiary of
ours and the former parent of Snapple Beverage Group and Royal Crown, and (3)
zero coupon convertible subordinated debentures due 2018. These extraordinary
charges consisted of (1) the write-off of previously unamortized deferred
financing costs of $27.5 million and (2) the payment of prepayment penalties and
fees of $5.5 million, both less income tax benefit of $12.3 million. There were
no similar charges in 2001.

LIQUIDITY AND CAPITAL RESOURCES

Cash Flows from Continuing Operating Activities

    Our consolidated operating activities from continuing operations provided
cash and cash equivalents, which we refer to in this discussion as cash, of
$12.0 million during 2002 reflecting (1) net operating investment adjustments of
$17.6 million, (2) net non-cash charges of $6.3 million and (3) the collection
of a litigation settlement receivable of $1.7 million, all partially offset by
(1) a loss from continuing operations of $9.8 million and (2) cash used by
changes in operating assets and liabilities of $3.8 million.

    The net operating investment adjustments of $17.6 million consisted of (1)
net recognized losses of $11.8 million principally due to the recognition of
non-cash other than temporary losses on available-for-sale securities and other
cost basis investments, (2) $5.2 million of net sales of trading securities in
excess of purchases and (3) a $0.6 million adjustment for the non-cash net
amortization of premium on debt securities.

    The net non-cash charges of $6.3 million consisted principally of $8.4
million of depreciation and amortization and $1.4 million of deferred
compensation, both partially offset by $3.5 million of minority interests in
loss of a consolidated subsidiary. The cash used by changes in operating assets
and liabilities of $3.8 million reflects a decrease in accounts payable and
accrued expenses of $6.1 million partially offset by decreases in receivables of
$1.6 million, prepaid expenses of $0.6 million and inventories of $0.1 million.
The decrease in accounts payable and accrued expenses was principally due to a
$4.0 million decrease in accrued incentive compensation. The decrease in
receivables was principally due to the collection of past due amounts from
franchisees.
28







    Cash flows from continuing operating activities were positive in 2002 even
after excluding the effect of the net sales of trading securities which
represent the discretionary investment of excess cash. However, we currently
expect that our continuing operating activities will require the net use of cash
in 2003, even after excluding the effect of any net purchases of trading
securities. This expected net use of cash results from the required funding of
net negative working capital of $20.8 million assumed in the Sybra Acquisition.
We expect to meet this operating cash flow requirement through the use of our
aggregate $623.5 million of existing cash and cash equivalents and short-term
investments, net of $9.2 million short-term investments sold with an obligation
for us to purchase.

Working Capital and Capitalization

    Working capital, which equals current assets less current liabilities, was
$510.4 million at December 29, 2002, reflecting a current ratio, which equals
current assets divided by current liabilities, of 4.2:1. Working capital
decreased $46.2 million from $556.6 million at December 30, 2001 principally due
to (1) the effect of the Sybra Acquisition consisting of the $9.7 million cost
and the $20.8 million of net negative working capital assumed in the acquisition
and (2) the reclassification of $25.9 million of long-term debt to current.

    Our total capitalization at December 29, 2002 was $719.8 million consisting
of stockholders' equity of $332.7 million and $387.1 million of long-term debt,
including current portion. Our total capitalization increased $73.7 million from
$646.1 million at December 30, 2001 principally due to (1) the assumption of
$103.2 million of debt in the Sybra Acquisition, (2) proceeds of $6.1 million
from stock option exercises and (3) net income of $1.3 million, all partially
offset by (1) repayments of long-term debt of $29.8 million, including $5.5
million related to debt assumed in the Sybra Acquisition, (2) repurchases of
$7.0 million of our common stock discussed below under 'Treasury Stock
Purchases' and (3) adjustments of $1.7 million in deriving comprehensive loss
from net income.

Contractual Obligations

    The following table summarizes the expected payments under our outstanding
contractual obligations at December 29, 2002:



                                                     FISCAL YEARS
                                      ------------------------------------------
                                      2003    2004-2005   2006-2007   AFTER 2007   TOTAL
                                      ----    ---------   ---------   ----------   -----
                                                         (IN MILLIONS)
                                                                    
Long-term debt (a)..................  $33.6    $ 72.7      $ 84.0      $191.2      $381.5
Capitalized leases (b)..............    0.8       1.5         0.6         2.7         5.6
Operating leases (c)................   17.4      29.0        23.3        84.3       154.0
Deferred compensation payable to
  related parties (d)...............     --      25.7          --          --        25.7
                                      -----    ------      ------      ------      ------
    Total...........................  $51.8    $128.9      $107.9      $278.2      $566.8
                                      -----    ------      ------      ------      ------
                                      -----    ------      ------      ------      ------


- ---------

(a) Excludes capitalized lease obligations, which are shown separately in the
    table, and interest.

(b) Excludes interest on capitalized lease obligations.

(c) Represents the future minimum rental obligations including $12.2 million of
    net unfavorable lease amounts we have provided and which will not be
    included in rent expense in future periods.

(d) Represents amounts due to the Executives in 2004, which can be settled
    either by the payment of cash or transfer of the investments held in the
    Trust. The Executives may elect to defer receipt beyond 2004.

Securitization Notes and Sybra Long-Term Debt

    We have outstanding, through our ownership of Arby's Franchise Trust,
Securitization Notes with a remaining principal balance of $254.8 million as of
December 29, 2002 which are due no later than December 2020. However, based on
current projections and assuming the adequacy of available funds, as defined
under the indenture for the Securitization Notes, which we refer to as the
Indenture, we currently estimate that we will repay $20.7 million in 2003 with
increasing annual payments to $37.4 million in 2011 in accordance with

                                                                            29







a targeted principal payment schedule. The Securitization Notes are redeemable
by Arby's Franchise Trust at an amount equal to the total of remaining
principal, accrued interest and the excess, if any, of the discounted value of
the remaining principal and interest payments over the outstanding principal
amount of the Securitization Notes.

    Obligations under the Securitization Notes are insured by a financial
guarantee company and are collateralized by assets with a total net book value
of $46.0 million as of December 29, 2002 consisting of cash and cash equivalents
of $9.2 million, the cash equivalent reserve account of $30.5 million referred
to above and royalty receivables of $6.3 million.

    We have outstanding, through our ownership of Sybra, leasehold notes,
equipment notes and mortgage notes. The leasehold notes have a remaining
principal of $82.0 million and are due generally in equal monthly installments
including interest through 2021, of which $5.9 million is due in 2003. The
leasehold notes are secured by leasehold improvements, equipment and inventories
with respective net book values of $32.0 million, $12.8 million and $2.1
million. The equipment notes have a remaining principal of $6.3 million and are
generally due in equal monthly installments including interest through 2009, of
which $1.3 million is due in 2003. The equipment notes are secured by restaurant
equipment with a net book value of $7.1 million. The mortgage notes have a
remaining principal of $3.3 million and are generally due in equal monthly
installments including interest through 2018, of which $0.1 million is due in
2003. The mortgage notes are secured by land and buildings of restaurants each
with net book values of $1.1 million.

    The loan agreements for most of the Sybra leasehold notes, mortgage notes
and equipment notes contain various prepayment provisions that provide for
prepayment penalties of up to 5% of the principal amount prepaid or are based
upon specified 'yield maintenance' formulas.

    The Indenture and the agreements for the leasehold notes and mortgage notes
contain various covenants, the most restrictive of which (1) require periodic
financial reporting, (2) require meeting certain debt service coverage ratio
tests and (3) restrict, among other matters, (a) the incurrence of indebtedness,
(b) certain asset dispositions and (c) the payment of distributions by Arby's
Franchise Trust and Sybra. Arby's Franchise Trust and Sybra were in compliance
with all of these covenants as of December 29, 2002.

    As of December 29, 2002, Arby's Franchise Trust had no amounts available for
the payment of distributions. However, on January 21, 2003, $1.6 million
relating to cash flows for the calendar month of December 2002 became available
for the payment of distributions by Arby's Franchise Trust through its parent to
Arby's which, in turn, would be available to Arby's to pay management service
fees or Federal income tax sharing payables to Triarc or, to the extent of any
excess, make distributions to Triarc. In connection with Sybra's reorganization,
Sybra is unable to pay any distributions prior to December 27, 2004.

    Sybra is required to maintain a fixed charge coverage ratio under the
agreements for the leasehold notes and equipment notes. In the event that Sybra
fails to maintain the minimum fixed charge coverage ratio, such failure may be
cured by a capital contribution in cash to Sybra in the quarter immediately
following such period of an amount such that the minimum fixed charge coverage
ratio would have been met.

Other Long-Term Debt

    We have a secured bank term loan payable through 2008 with an outstanding
principal amount of $18.3 million as of December 29, 2002, of which $3.2 million
is due during 2003. We also have an 8.95% secured promissory note payable
through 2006 with an outstanding principal amount of $13.3 million as of
December 29, 2002, of which $1.9 million is due during 2003.

    Our total scheduled long-term debt repayments during 2003 are $34.4 million
consisting principally of the $20.7 million expected to be paid under the
Securitization Notes, $7.3 million under Sybra's leasehold, equipment and
mortgage notes, $3.2 million due on the secured bank term loan and $1.9 million
due on the 8.95% secured promissory note.

Guarantees and Commitments

    Our wholly-owned subsidiary, National Propane Corporation, retains a less
than 1% special limited partner interest in our former propane business, now
known as AmeriGas Eagle Propane, L.P., which we refer to as AmeriGas Eagle.
National Propane agreed that while it remains a special limited partner of
AmeriGas Eagle,

30







it would indemnify the owner of AmeriGas Eagle for any payments the owner makes
related to the owner's obligations under certain of the debt of AmeriGas Eagle,
aggregating approximately $138.0 million as of December 29, 2002, if AmeriGas
Eagle is unable to repay or refinance such debt, but only after recourse by the
owner to the assets of AmeriGas Eagle. National Propane's principal asset is an
intercompany note receivable from Triarc in the amount of $30.0 million as of
December 29, 2002 which amount was increased to $50.0 million as of January 1,
2003. We believe it is unlikely that we will be called upon to make any payments
under this indemnity. In August 2001, AmeriGas Propane, L.P., which we refer to
as AmeriGas Propane, purchased all of the interests in AmeriGas Eagle other than
National Propane's special limited partner interest. Either National Propane or
AmeriGas Propane may require AmeriGas Eagle to repurchase the special limited
partner interest. However, we believe it is unlikely that either party would
require repurchase prior to 2009 as either AmeriGas Propane would owe us tax
indemnification payments if AmeriGas Propane required the repurchase or we would
accelerate payment of deferred taxes, which would amount to $43.4 million as of
December 29, 2002, associated with our July 1999 sale of the propane business if
National Propane required the repurchase. In the event the interest is not
repurchased prior to 2009, we estimate our actual related taxes payable to be
$4.0 million in 2003 with further payments in 2004 through 2008 reducing the
taxes payable in 2009 to approximately $36.0 million.

    Triarc guarantees mortgage and equipment notes payable through 2015 of
approximately $42.0 million as of December 29, 2002 related to 355 restaurants
sold by us in 1997. The purchaser of the restaurants also assumed substantially
all of the associated lease obligations which extend through 2031, including all
then existing extension or renewal option periods, although Arby's remains
contingently liable if the purchaser does not make the required future lease
payments. Those lease obligations total approximately $66.0 million as of
December 29, 2002, assuming the purchaser has made all scheduled payments
through that date under those lease obligations.

    We guarantee up to $6.7 million of senior notes that mature in January 2007
issued by Encore to a major financial institution. During 2002, the outstanding
principal amount of these notes was reduced from $10.0 million to $7.2 million
as the lender forgave $2.8 million of principal and $2.5 million of related
accrued interest upon an investment by certain significant stockholders,
including us, of $5.0 million in newly-issued convertible preferred stock of
Encore. Our portion of the preferred stock investment was $0.9 million and
certain of our present officers, including entities controlled by them, invested
an aggregate of $1.4 million. Our guarantee will be reduced by (1) any
repayments of these senior notes, (2) any purchases of these senior notes by us
and (3) the amount of certain investment banking or financial advisory services
fees paid to the financial institution by us, Encore or another significant
stockholder of Encore or any of their affiliates. Some of our present and former
officers, including entities controlled by them, who collectively owned 15.7% of
Encore at the time of Encore's initial public offering in July 1999 are not
parties to this note guarantee and could indirectly benefit from it.

    In addition to the note guarantee, we and certain other stockholders of
Encore, including our present and former officers referred to above who had
invested in Encore prior to its initial public offering, on a joint and several
basis, have entered into guarantees and agreements to guarantee up to $15.0
million of revolving credit borrowings of a subsidiary of Encore. We would be
responsible for approximately $1.8 million assuming the full $15.0 million was
borrowed and all of the parties, besides us, to the guarantees of the revolving
credit borrowings and certain related agreements fully perform thereunder. As of
Encore's year end of December 31, 2002, Encore had $3.9 million of outstanding
revolving credit borrowings. At December 29, 2002 we had a $15.0 million
interest-bearing bank custodial account at the financial institution providing
the revolving credit facility. Under the guarantees of the revolving credit
borrowings, this deposit is subject to set off under certain circumstances if
the parties to these guarantees of the revolving credit borrowings and related
agreements fail to perform their obligations thereunder.

    Encore had encountered cash flow and liquidity difficulties in the past.
However, Encore's liquidity and capital were positively impacted by the debt
forgiveness and preferred stock investment discussed above. Encore also has
returned to profitability, and it reported net income available to common
stockholders for its year ended December 31, 2002. We currently believe it is
unlikely that we will be required to make payments under the note guarantee
and/or the bank guarantees.

                                                                              31







Capital Expenditures

    During 2002 cash capital expenditures included in 'Properties' in our
accompanying consolidated balance sheet amounted to $0.1 million and we
purchased a fractional interest in the use of a helicopter for $1.2 million. We
expect that cash capital expenditures will be approximately $3.6 million during
2003, principally to remodel company-owned restaurants, for which there were no
outstanding commitments as of December 29, 2002.

Acquisitions and Investments

    On December 27, 2002 we completed the Sybra Acquisition for $9.7 million,
including estimated fees and expenses of $1.5 million, as discussed in more
detail in the 'Introduction' to this 'Management's Discussion and Analysis of
Financial Condition and Results of Operations.' The purchase price, less cash of
Sybra of $9.4 million, resulted in a net use of our cash of $0.3 million.

    As of December 29, 2002, we have $658.2 million of cash, cash equivalents
and investments, including $34.7 million of investments classified as
non-current and net of $9.2 million of securities sold with an obligation for us
to purchase included in 'Accrued expenses' in our accompanying consolidated
balance sheet. We also had $32.5 million of restricted cash equivalents
including $30.5 million held in a reserve account discussed above under
Securitization Notes. The non-current investments include $22.7 million of
investments, at cost, in the Trusts designated to satisfy deferred compensation.
We continue to evaluate strategic opportunities for the use of our significant
cash and investment position, including additional business acquisitions,
repurchases of Triarc common shares (see 'Treasury Stock Purchases' below) and
investments.

Income Taxes

    Our Federal income tax returns for years subsequent to 1993 have not been
examined by the Internal Revenue Service, which we refer to as the IRS. However,
should any income taxes or interest be assessed as the result of any Federal or
state examinations for periods through the October 25, 2000 date of the Snapple
Beverage Sale, Cadbury has agreed to pay up to $5.0 million of any resulting
income taxes or associated interest relating to the operations of the former
beverage businesses.

Treasury Stock Purchases

    Our management is currently authorized, when and if market conditions
warrant, to repurchase up to $50.0 million of our class A common stock through
January 18, 2004. We cannot assure you that we will repurchase any shares under
this program. We repurchased 299,600 shares for a total cost of $7.2 million
during 2001 and 289,500 shares for a total cost of $7.0 million during 2002.

Discontinued Operations

    The agreement relating to the October 25, 2000 Snapple Beverage Sale
provides for a post-closing adjustment, the amount of which is in dispute.
Cadbury has stated that it currently believes that it is entitled to receive
from us a post-closing adjustment of $23.2 million plus interest at 7.19% from
October 25, 2000 while we, on the other hand, have stated that we currently
believe that no post-closing adjustment is required. We are in arbitration with
Cadbury to determine the amount of the post-closing adjustment, if any. We
currently expect the arbitration process to be completed in 2003.

Cash Requirements

    As of December 29, 2002, our consolidated cash requirements for continuing
operations for 2003, exclusive of operating cash flow requirements, consist
principally of (1) a maximum of $50.0 million of payments for repurchases of our
class A common stock for treasury under our current stock repurchase program,
(2) scheduled debt principal repayments aggregating $34.4 million, (3) capital
expenditures of approximately $3.6 million and (4) the cost of business
acquisitions, if any. Our consolidated cash requirements relating to
discontinued operations for 2003 consist principally of the Snapple Beverage
Sale post-closing adjustment, if any, of up to $23.2 million plus related
accrued interest. We anticipate meeting all of these requirements

32







through the use of our aggregate $623.5 million of existing cash and cash
equivalents and short-term investments, net of $9.2 million of short-term
investments sold with an obligation for us to purchase.

LEGAL AND ENVIRONMENTAL MATTERS

    In 2001, a vacant property owned by Adams Packing Association, Inc., a
non-operating subsidiary of ours, was listed by the United States Environmental
Protection Agency on the Comprehensive Environmental Response, Compensation and
Liability Information System, which we refer to as 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 Packing conducted drum recycling
operations at the site from some time prior to 1971 until the late 1970s. The
business operations of Adams Packing were sold in December 1992. Adams Packing
engaged an environmental consultant that, under the supervision of the Florida
Department of Environmental Protection, which we refer to as the Florida DEP,
conducted an investigation of the site that was intended to develop additional
information on the extent and nature of the soil and groundwater contamination
and the appropriate remediation for that contamination. Adams Packing's
environmental consultant has submitted to the Florida DEP a summary of the
results of this investigation and Adams Packing and the Florida DEP have
negotiated a work plan for further investigation of the site and limited
remediation of the identified contamination. The work plan is embodied in a
consent order between Adams Packing and the Florida DEP. The consent order has
been executed by Adams Packing and by the Florida DEP subsequent to December 29,
2002 and will become effective upon expiration without incident of a public
comment period. Based on a preliminary cost estimate of approximately $1.0
million for completion of the work plan developed by Adams Packing's
environmental consultant and, after taking into consideration various legal
defenses available to us, including Adams Packing, Adams Packing has provided
for its estimate of its liability for this matter, including related legal and
consulting fees.

    On March 23, 1999, a stockholder filed a complaint on behalf of persons who
held Triarc class A common stock as of March 10, 1999 which, as amended in April
2000, alleged that our tender offer statement filed with the Securities and
Exchange Commission in 1999, pursuant to which we repurchased 3,805,015 shares
of our class A common stock for $18.25 per share, was materially false and
misleading. The amended complaint sought damages in an unspecified amount,
together with prejudgment interest, the costs of suit, including attorneys'
fees, an order permitting all stockholders who tendered their shares in the
tender offer to rescind the transaction and unspecified other relief. The
amended complaint names us and the Executives as defendants. On October 17,
2002, the court presiding over the matter granted our motion to dismiss this
action and subsequently entered a judgment dismissing the case. On November 21,
2002, the plaintiff filed a notice of appeal. Subsequent to December 29, 2002,
the plaintiff withdrew the appeal.

    In October 1998, various class action lawsuits were filed on behalf of our
stockholders. Each of these actions names us, the Executives and members of our
board of directors as defendants. On March 26, 1999, certain plaintiffs in these
actions filed an amended complaint making allegations substantially similar to
those asserted in the March 23, 1999 action described in the preceding
paragraph. In October 2000, the plaintiffs agreed to stay this action pending
determination of the March 23, 1999 action discussed in the preceding paragraph.

    In addition to the environmental matter and stockholder lawsuits described
above, we are involved in other litigation and claims incidental to our
business. We and our subsidiaries have reserves for all of our legal and
environmental matters aggregating $2.7 million as of December 29, 2002. Although
the outcome of these 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/or our subsidiaries,
and given the aforementioned reserves, we do not believe that the outcome of
these legal and environmental matters will have a material adverse effect on our
consolidated financial position or results of operations.

APPLICATION OF CRITICAL ACCOUNTING POLICIES

    The preparation of our consolidated financial statements in conformity with
accounting principles generally accepted in the United States of America
requires us to make estimates and assumptions in applying our critical
accounting policies that affect the reported amounts of assets and liabilities
and the disclosure of contingent assets and liabilities at the date of the
consolidated financial statements and the reported amount of

                                                                              33







revenues and expenses during the reporting period. Our estimates and assumptions
concern, among other things, contingencies for legal, environmental, tax and
other matters and the valuations of some of our investments. We evaluate those
estimates and assumptions on an ongoing basis based on historical experience and
on various other factors which we believe are reasonable under the
circumstances.

    We believe that the following represent our more critical estimates and
assumptions used in the preparation of our consolidated financial statements:

         The amount of the post-closing adjustment, if any, being arbitrated in
         connection with the Snapple Beverage Sale:

         Cadbury has stated that it currently believes it is entitled to receive
         from us a post-closing adjustment of $23.2 million, plus interest at
         7.19% from October 25, 2000, while we, on the other hand, have stated
         we currently believe that no post-closing adjustment is required. To
         the extent that the actual post-closing adjustment differs from the
         estimate we have accrued, that difference will be reflected net of
         income tax effect in the gain or loss on disposal component of total
         income or loss from discontinued operations in the fiscal quarter the
         adjustment is finalized, which we currently expect will be in 2003. To
         the extent the actual interest differs from the estimate we have
         accrued, that difference will be reflected in interest expense in the
         same fiscal quarter the post-closing adjustment is finalized.

         Reserves for the resolution of income tax contingencies which are
         subject to future examinations of our Federal and state income tax
         returns by the IRS, or state taxing authorities, including remaining
         provisions included in 'Net current liabilities relating to
         discontinued operations' in our consolidated balance sheets:

         Our Federal income tax returns subsequent to 1993 have not been
         examined by the IRS. However, should any income taxes or interest be
         assessed as the result of any Federal or state examinations through the
         October 25, 2000 date of the Snapple Beverage Sale, Cadbury has agreed
         to pay up to $5.0 million of any resulting income taxes or associated
         interest relating to the operations of the discontinued beverage
         businesses.

         Reserves which total $2.7 million at December 29, 2002 for the
         resolution of all of our legal and environmental matters as discussed
         immediately above under 'Legal and Environmental Matters':

         Should the actual cost of settling these matters differ from the
         reserves we have accrued, that difference will be reflected in our
         results of operations in the fiscal quarter in which the matter is
         resolved or when our estimate of the cost changes.

         Valuations of some of our investments:

         Our investments in short-term available-for-sale and trading marketable
         securities are valued based on quoted market prices or statements of
         account received from investment managers which are principally based
         on quoted market or brokered/dealer prices. Accordingly, we do not
         anticipate any significant changes from the valuations of these
         investments. Our investments in other short-term investments accounted
         for under the cost method, which we refer to as Cost Investments, and
         investments accounted for under the equity method, which we refer to as
         Equity Investments, and the majority of our non-current investments are
         valued almost entirely based on statements of account received from the
         investment managers or the investees which are principally based on
         quoted market or brokered/dealer prices. To the extent that some of
         these investments, including the underlying investments in investment
         limited partnerships, do not have available quoted market or
         brokered/dealer prices, we rely on third-party appraisals or valuations
         performed by the investment managers or the investees in valuing those
         securities. These valuations are subjective and thus subject to
         estimates which could change significantly from period to period. Those
         changes in estimates in Cost Investments would impact our earnings only
         to the extent of losses which are deemed to be other than temporary.
         The total carrying value of these investments was approximately $16.1
         million as of December 29, 2002. Those changes in estimates related to
         the underlying income or losses of our Equity Investments in investment
         limited partnerships would directly impact our earnings for our share
         of the investments. However, the total carrying value of these
         investments is only $1.8 million as of December 29, 2002. We also have
         $4.1 million of non-marketable Cost Investments in securities for which
         it is not practicable to estimate fair value

34







         because the investments are non-marketable and are in start-up
         enterprises for which we currently believe the carrying amount is
         recoverable.

         Provisions for unrealized losses on certain investments deemed to be
         other than temporary:

         We review all of our investments that have unrealized losses for any
         that we might deem other than temporary. The losses we have recognized
         were deemed to be other than temporary due to declines in the
         underlying economics of specific securities or volatility in capital
         and lending markets. This includes the underlying investments of any of
         our investment limited partnerships and similar investment entities in
         which we have an overall unrealized loss. This process is subjective
         and subject to estimation. We have aggregate unrealized holding losses
         on our available-for-sale marketable securities of $1.0 million as of
         December 29, 2002 which, if not recovered, may result in the
         recognition of future losses. Also, should any of our Cost Investments,
         which total approximately $50.8 million as of December 29, 2002,
         experience declines in value due to conditions that we deem to be other
         than temporary, we may recognize additional other than temporary
         losses. We have permanently reduced the cost basis component of the
         investments for which we have recognized other than temporary losses of
         $3.7 million, $3.5 million and $14.5 million during 2000, 2001 and
         2002, respectively. As such, recoveries in the value of the
         investments, if any, will not be recognized in income until the
         investments are sold.

    Our estimates of each of these items historically have been adequate.
However, due to uncertainties inherent in the estimation process, it is
reasonably possible that the actual resolution of any of these items could vary
significantly from the estimate and, accordingly, there can be no assurance that
the estimates may not materially change in the near term.

INFLATION AND CHANGING PRICES

    We believe that inflation did not have a significant effect on our
consolidated results of operations during 2000, 2001 and 2002 since inflation
rates generally remained at relatively low levels.

SEASONALITY

    Our continuing operations are not significantly impacted by seasonality.
However, our restaurant revenues are somewhat lower in our first quarter.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

    In June 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 143, 'Accounting for Asset Retirement
Obligations.' Statement 143 addresses financial accounting and reporting for
legal obligations associated with the retirement of tangible long-lived assets
and the associated asset retirement costs. Statement 143 requires that the
discounted fair value of an asset retirement obligation be recorded as a
liability in the period in which it is incurred or as soon thereafter as a
reasonable estimate of fair value can be made, with a corresponding increase to
the carrying amount of the long-lived asset. The capitalized cost is depreciated
over the useful life of the related asset. The provisions of Statement 143 are
effective starting with the first quarter of 2003. We do not believe that any of
our tangible long-lived assets presently have material associated retirement
obligations and, accordingly, we do not expect that the adoption of Statement
143 will have any immediate effect on our consolidated financial position or
results of operations.

    In April 2002, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 145, 'Rescission of FASB Statements No. 4,
44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections.'
Statement 145 most significantly rescinds Statement 4, 'Reporting Gains and
Losses from Extinguishment of Debt,' which required that gains and losses from
extinguishment of debt that were included in the determination of net income be
aggregated and, if material, classified as an extraordinary item, net of related
tax effect. Under Statement 145, any gains and losses from extinguishment of
debt will be classified as extraordinary items only if they meet the criteria in
Accounting Principles Board Opinion No. 30, 'Reporting the Results of
Operations -- Reporting the Effects of Disposal of a Segment of a Business, and
Extraordinary, Unusual and Infrequently Occurring Events and Transactions.'
Those criteria specify that

                                                                              35







extraordinary items must be both unusual in their nature and infrequent in their
occurrence. The provisions of Statement 145 with respect to the rescission of
Statement 4 must be adopted no later than our fiscal year beginning December 30,
2002 and require that prior periods presented be reclassified accordingly. Upon
adoption of Statement 145, we expect that any future charges relating to the
early extinguishment of debt will not meet the criteria of extraordinary items
under Opinion 30 and, therefore, will be reported as a component of costs and
expenses on a pretax basis with any applicable income tax benefit included in
our provision for or benefit from income taxes. This change in classification
would not have any impact on our reported net income or loss.

    In June 2002, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 146, 'Accounting for Costs Associated with
Exit or Disposal Activities.' Statement 146 replaces the previous accounting
guidance provided by Issue No. 94-3, 'Liability Recognition for Certain Employee
Termination Benefits and Other Costs to Exit an Activity (including Certain
Costs Incurred in a Restructuring),' of the Emerging Issues Task Force of the
Financial Accounting Standards Board. Under Statement 146, costs associated with
exit or disposal activities, other than those associated with a business
acquisition, will be recognized when they are incurred rather than at the date
of a commitment to an exit or disposal plan under Issue 94-3. Examples of costs
covered by Statement 146 include contract termination costs, including leases,
and certain employee severance costs that are associated with a restructuring,
discontinued operation, plant closing, or other exit or disposal activity.
Statement 146 is to be applied prospectively to exit or disposal activities
initiated after December 31, 2002. Since we do not presently have any exit or
disposal plans other than severance pay, relocation costs and other costs
associated with relocating the Sybra corporate offices, Statement 146 will not
have any immediate effect on our consolidated financial position or results of
operations.

    In November 2002, The Financial Accounting Standards Board issued
Interpretation No. 45, 'Guarantor's Accounting and Disclosure Requirements for
Guarantees, Including Indirect Guarantees of Indebtedness of Others,' an
interpretation of Statements No. 5, 57 and 107 and rescission of Interpretation
No. 34. Interpretation No. 45 elaborates on the existing disclosure requirements
for most guarantees. Interpretation No. 45 also expands on the accounting
guidance of Statement No. 5 'Accounting for Contingencies' and provides that at
the time a guarantee is issued a liability must be recognized for the fair value
of the obligation undertaken in issuing the guarantee, including the ongoing
obligation to stand ready to perform over the term of the guarantee in the event
that the specified triggering events or conditions occur. Certain types of
guarantees are not included in the scope of Interpretation No. 45. In the past,
we have occasionally guaranteed debt or lease obligations in connection with the
sale of businesses or to support our investment in an affiliate. The initial
recognition provisions of Interpretation No. 45 are applicable on a prospective
basis to guarantees issued or modified after December 31, 2002 and, accordingly,
will not have any immediate effect on our consolidated financial position or
results of operations. However, to the extent we enter into any similar
guarantees commencing January 1, 2003, we would be required to recognize the
fair value of the guarantees in our consolidated financial statements. The
disclosure requirements of Interpretation No. 45 are effective for our year
ended December 29, 2002 and our disclosure of our guarantees conforms with these
requirements.

    In January 2003, the Financial Accounting Standards Board issued
Interpretation No. 46 'Consolidation of Variable Interest Entities,' an
interpretation of Accounting Research Bulletin No. 51, 'Consolidated Financial
Statements.' Variable interest entities, which were formerly referred to as
special purpose entities, are generally entities that either (1) have equity
investors that do not provide significant financial resources for the entity to
sustain its activities or (2) have equity investors without voting rights. Under
Interpretation No. 46 variable interest entities must be consolidated by the
primary beneficiary. The primary beneficiary is generally defined as having the
majority of the risks and rewards of ownership arising from the variable
interest entity. Interpretation No. 46 also requires certain disclosures if a
significant, but not majority, variable interest is held. Interpretation No. 46
applies immediately for variable interests in entities created or obtained after
January 31, 2003 and in the first fiscal period beginning after June 15, 2003
for variable interests in entities acquired before February 1, 2003. Since we do
not presently have interests in any variable interest entities, the application
of Interpretation No. 46 will not have any immediate effect on our consolidated
financial position or results of operations.

36







ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

    Certain statements we make under this Item 7A constitute 'forward-looking
statements' under the Private Securities Litigation Reform Act of 1995. See
'Special Note Regarding Forward-Looking Statements and Projections' in 'Part I'
preceding 'Item 1.'

    We are exposed to the impact of interest rate changes, changes in the market
value of our investments and, to a lesser extent, foreign currency fluctuations.

    Policies and procedures -- In the normal course of business, we employ
established policies and procedures to manage our exposure to changes in
interest rates, changes in the market value of our investments and fluctuations
in the value of foreign currencies using financial instruments we deem
appropriate.

Interest Rate Risk

    Our objective in managing our exposure to interest rate changes is to limit
the impact of interest rate changes on earnings and cash flows. As of December
29, 2002, our long-term debt, including current portion, aggregated $387.1
million and consisted of $368.8 million of fixed-rate debt, including $5.6
million of capitalized leases, and $18.3 million of a variable-rate bank loan.
The fair value of our fixed-rate debt will increase if interest rates decrease.
We generally use interest rate caps or interest rate swap agreements on a
portion of our variable-rate debt to limit our exposure to the effects of
increases in short-term interest rates on our earnings and cash flows. As of
December 29, 2002 we did not have any interest rate cap agreements outstanding.
However, we do have an interest rate swap agreement in connection with our
variable-rate bank term loan. The swap agreement effectively establishes a fixed
interest rate on this variable-rate debt, but with an embedded written call
option whereby the swap agreement will no longer be in effect if, and for as
long as, the one-month London Interbank Offered Rate, which we refer to as
LIBOR, is at or above the specified rate of 6.5% which was 3% higher than the
one-month LIBOR at the time the swap agreement was entered into. This swap
agreement, therefore, does not fully protect us from exposure to significant
increases in interest rates due to the written call option. In addition to our
fixed-rate and variable-rate debt, our investment portfolio includes debt
securities that are subject to interest rate risk with maturities which range
from less than one year to nearly thirty years. The fair market value of all of
our investments in debt securities will decline if interest rates increase.

Equity Market Risk

    Our objective in managing our exposure to changes in the market value of our
investments is to balance the risk of the impact of these changes on earnings
and cash flows with our expectations for long-term investment returns. Our
primary exposure to equity price risk relates to our investments in equity
securities, equity derivatives, securities sold with an obligation for us to
purchase and investment limited partnerships and similar investment entities. We
have established policies and procedures governing the type and relative
magnitude of investments we may make. We have a management investment committee
which supervises the investment of certain funds not currently required for our
operations and our board of directors has established certain investment
policies to be followed with respect to the investment of funds.

Foreign Currency Risk

    Our objective in managing our exposure to foreign currency fluctuations is
to limit the impact of these fluctuations on earnings and cash flows. Our
primary exposure to foreign currency risk relates to our investments in certain
investment limited partnerships and similar investment entities that hold
foreign securities. To a more limited extent, we have foreign currency exposure
when one of our investment funds buys or sells foreign currencies or financial
instruments denominated in foreign currencies. However, some of the investment
managers hedge the foreign currency exposure, thereby substantially mitigating
the risk. We monitor these exposures and periodically determine our need for the
use of strategies intended to lessen or limit our exposure to these
fluctuations. We also have a relatively limited amount of exposure to (1)
investments in foreign subsidiaries and (2) export revenues and related
receivables denominated in foreign currencies which are subject to foreign
currency fluctuations. Our foreign subsidiary exposures relate to operations in
Canada and our export revenue exposures primarily relate to royalties in Canada.
Foreign operations and foreign export revenues of continuing operations for the
years ended December 30, 2001 and December 29, 2002 together represented

                                                                              37







only 3% and 2%, respectively, of our total royalties and franchise and related
fees, and an immediate 10% change in foreign currency exchange rates versus the
United States dollar from their levels at December 30, 2001 and December 29,
2002 would not have a material effect on our consolidated financial position or
results of operations.

Overall Market Risk

    We balance our exposure to overall market risk by investing a portion of our
portfolio in cash and cash equivalents with relatively stable and risk-minimized
returns. We periodically interview and select asset managers to avail ourselves
of higher, but more risk-inherent, returns from the investment strategies of
these managers. We also seek to identify alternative investment strategies that
may earn higher returns with attendant increased risk profiles for a portion of
our investment portfolio. We continue to evaluate whether to adjust our asset
allocations to increase the portion of our investments which offer the
opportunity for higher, but more risk-inherent, returns and lower the portion of
our risk-minimized investments. We periodically review the returns from each of
our investments and may maintain, liquidate or increase selected investments
based on this review and our assessment of potential future returns.

    We maintain investment portfolio holdings of various issuers, types and
maturities. As of December 30, 2001 and December 29, 2002, such investments
consisted of the following (in thousands):



                                                                   YEAR-END
                                                              -------------------
                                                                2001       2002
                                                                ----       ----
                                                                   
Cash equivalents included in 'Cash' on our consolidated
  balance sheets............................................  $489,978   $449,005
Short-term investments......................................   153,401    175,161
                                                              --------   --------
    Total cash equivalents and short-term investments.......   643,379    624,166
Restricted cash equivalents.................................    32,506     32,476
Non-current investments.....................................    42,074     34,717
                                                              --------   --------
                                                              $717,959   $691,359
                                                              --------   --------
                                                              --------   --------


    Our cash equivalents are short-term, highly liquid investments with
maturities of three months or less when acquired and consisted principally of
money market mutual funds, interest-bearing brokerage and bank accounts with a
stable value, commercial paper of high credit-quality entities and United States
government agency debt securities. Our short-term investments included $30.0
million and $75.4 million as of December 30, 2001 and December 29, 2002,
respectively, of United States government and government agency debt securities
with maturities ranging from ten months to two years when acquired. The $30.0
million and $75.4 million together with our cash equivalents were highly liquid
investments that combined constituted over 80% of our total cash equivalents and
short-term investments in each year shown above.

38







    At December 30, 2001 our investments were classified in the following
general types or categories (in thousands):



                                                                       CARRYING VALUE
                                                    AT FAIR VALUE   ---------------------
                 TYPE                    AT COST      OR EQUITY      AMOUNT    PERCENTAGE
                 ----                    -------      ---------      ------    ----------
                                                                   
Cash equivalents.......................  $489,978     $489,978      $489,978       68%
Restricted cash equivalents............    32,506       32,506        32,506        5%
Securities accounted for as:
    Trading securities.................    27,072       25,014        25,014        4%
    Available-for-sale securities......   100,839      102,355       102,355       14%
Non-current investments held in
  deferred compensation trusts
  accounted for at cost................    22,671       24,356        22,671        3%
Other current and non-current
  investments in investment limited
  partnerships and similar investment
  entities accounted for at:
    Cost...............................    24,289       35,920        24,289        3%
    Equity.............................     8,250        8,797         8,797        1%
Other non-current investments accounted
  for at:
    Cost...............................    12,070       12,070        12,070        2%
    Equity.............................     3,227          279           279        --
                                         --------     --------      --------      ----
Total cash equivalents and long
  investment positions.................  $720,902     $731,275      $717,959      100%
                                         --------     --------      --------      ----
                                         --------     --------      --------      ----
Securities sold with an obligation for
  us to purchase accounted for as
  trading securities...................  $(19,189)    $(17,384)     $(17,384)      N/A
                                         --------     --------      --------
                                         --------     --------      --------


    At December 29, 2002 our investments were classified in the following
general types or categories (in thousands):



                                                                         CARRYING VALUE
                                                      AT FAIR VALUE   ---------------------
                   TYPE                    AT COST      OR EQUITY      AMOUNT    PERCENTAGE
                   ----                    -------      ---------      ------    ----------
                                                                     
  Cash equivalents......................   $449,005     $449,005      $449,005       65%
  Restricted cash equivalents...........     32,476       32,476        32,476        5%
  Securities accounted for as:
      Trading securities................     15,351       12,412        12,412        2%
      Available-for-sale securities.....    143,920      144,142       144,142       21%
  Non-current investments held in
    deferred compensation trusts
    accounted for at cost...............     22,671       25,706        22,671        3%
  Other current and non-current
    investments in investment limited
    partnerships and similar investment
    entities accounted for at:
      Cost..............................     23,188       36,818        23,188        3%
      Equity............................      1,687        1,809         1,809        --
  Other non-current investments
    accounted for at:
      Cost..............................      4,975        6,022         4,975        1%
      Equity............................      2,895          681           681        --
                                           --------     --------      --------      ----
  Total cash equivalents and long
    investment positions................   $696,168     $709,071      $691,359      100%
                                           --------     --------      --------      ----
                                           --------     --------      --------      ----
  Securities sold with an obligation for
    us to purchase accounted for as
    trading securities..................   $ (9,953)    $ (9,168)     $ (9,168)      N/A
                                           --------     --------      --------
                                           --------     --------      --------


    Our marketable securities are classified and accounted for either as
'available-for-sale' or 'trading' and are reported at fair market value with the
resulting net unrealized holding gains or losses, net of income taxes, reported
as a separate component of comprehensive income or loss bypassing net income or
included as a component of net income, respectively. Investment limited
partnerships and similar investment entities and

                                                                              39







other non-current investments in which we do not have significant influence over
the investee are accounted for at cost (see below). Realized gains and losses on
investment limited partnerships and similar investment entities and other
non-current investments recorded at cost are reported as investment income or
loss in the period in which the securities are sold. Investment limited
partnerships and similar investment entities and other non-current investments
in which we have significant influence over the investee are accounted for in
accordance with the equity method of accounting under which our results of
operations include our share of the income or loss of each of the investees. We
review all of our investments in which we have unrealized losses for any
unrealized losses deemed to be other than temporary. We recognize an investment
loss currently for any resulting other than temporary loss with a permanent
reduction in the cost basis component of the investment. The cost of investments
reflected in the tables above represents original cost less unrealized losses
that were deemed to be other than temporary.

SENSITIVITY ANALYSIS

    For purposes of this disclosure, market risk sensitive instruments are
divided into two categories: instruments entered into for trading purposes and
instruments entered into for purposes other than trading. Our measure of market
risk exposure represents an estimate of the potential change in fair value of
our financial instruments. Market risk exposure is presented for each class of
financial instruments held by us at December 30, 2001 and December 29, 2002 for
which an immediate adverse market movement causes a potential material impact on
our financial position or results of operations. We believe that the rates of
adverse market movements described below represent the hypothetical loss to
future earnings and do not represent the maximum possible loss nor any expected
actual loss, even under adverse conditions, because actual adverse fluctuations
would likely differ. In addition, since our investment portfolio is subject to
change based on our portfolio management strategy as well as market conditions,
these estimates are not necessarily indicative of the actual results which may
occur.

    The following tables reflect the estimated effects on the market value of
our financial instruments as of December 30, 2001 and December 29, 2002 based
upon assumed immediate adverse effects as noted below (in thousands):

TRADING PURPOSES:



                                                             YEAR-END
                                           ---------------------------------------------
                                                   2001                    2002
                                           ---------------------   ---------------------
                                           CARRYING     EQUITY     CARRYING     EQUITY
                                            VALUE     PRICE RISK    VALUE     PRICE RISK
                                            -----     ----------    -----     ----------
                                                                  
Equity securities........................  $ 22,349    $(2,235)    $ 11,811    $(1,181)
Debt securities..........................     2,665       (267)         601        (60)
Securities sold with an obligation to
  purchase...............................   (17,384)     1,738       (9,168)       917


    The debt securities included in the trading portfolio were entirely
investments in convertible bonds which trade primarily on the conversion feature
of the securities rather than on the stated interest rate and, as such, there
was no material interest rate risk since a change in interest rates of one
percentage point would not have had a material impact on our consolidated
financial position or results of operations. The securities included in the
trading portfolio denominated in foreign currency totaled less than $1.0 million
and, accordingly, there was no significant foreign currency risk.

    The sensitivity analysis of financial instruments held for trading purposes
assumes an instantaneous 10% decrease in the equity markets in which we are
invested from their levels at December 30, 2001 and December 29, 2002, with all
other variables held constant. For purposes of this analysis, our debt
securities, which were entirely convertible bonds, were assumed to primarily
trade based upon the conversion feature of the securities and be perfectly
correlated with the assumed equity index.

40







OTHER THAN TRADING PURPOSES:



                                                          YEAR-END 2001
                                        -------------------------------------------------
                                        CARRYING   INTEREST      EQUITY        FOREIGN
                                         VALUE     RATE RISK   PRICE RISK   CURRENCY RISK
                                         -----     ---------   ----------   -------------
                                                                
Cash equivalents......................  $489,978   $     (4)    $    --         $  --
Restricted cash equivalents...........    32,506         --          --            --
Available-for-sale United States
  government and government agency
  debt securities.....................    30,009       (600)         --            --
Available-for-sale corporate debt
  securities..........................    10,157        (51)         --            --
Available-for-sale asset-backed
  securities..........................    24,183     (2,116)         --            --
Available-for-sale equity securities..    30,131         --      (3,013)           --
Available-for-sale debt mutual fund...     7,875       (158)         --            --
Other investments.....................    68,106     (2,048)     (2,930)          (84)
Long-term debt........................   313,723    (13,942)         --            --
Interest rate swap agreement in a
  payable position....................       651       (369)         --            --
Written call option on common stock...        30         --        (123)           --


                                                          YEAR-END 2002
                                        -------------------------------------------------
                                        CARRYING   INTEREST      EQUITY        FOREIGN
                                         VALUE     RATE RISK   PRICE RISK   CURRENCY RISK
                                         -----     ---------   ----------   -------------
                                                                
Cash equivalents......................  $449,005   $    (35)    $    --         $  --
Restricted cash equivalents...........    32,476         --          --            --
Available-for-sale United States
  government and government agency
  debt securities.....................    75,372       (440)         --            --
Available-for-sale corporate debt
  securities..........................     9,988        (33)         --            --
Available-for-sale asset-backed
  securities..........................    24,332     (1,703)         --            --
Available-for-sale equity securities..    26,104         --      (2,610)           --
Available-for-sale debt mutual fund...     8,346       (125)         --            --
Other investments.....................    53,324     (1,867)     (2,799)          (78)
Long-term debt, excluding capitalized
  lease obligations...................   381,474    (16,909)         --            --
Interest rate swap agreement in a
  payable position....................     1,229       (424)         --            --


    The sensitivity analysis of financial instruments held at December 30, 2001
and December 29, 2002 for purposes other than trading assumes an instantaneous
change in market interest rates of one percentage point and an instantaneous 10%
decrease in the equity markets in which we are invested, both with all other
variables held constant. For purposes of this analysis, our debt investments
were assumed to have average maturities as set forth below. Our cash equivalents
consisted of $487.0 million and $420.7 million as of December 30, 2001 and
December 29, 2002, respectively, of money market funds and interest-bearing
brokerage and bank accounts which are designed to maintain a stable value and,
as a result, were assumed to have no interest rate risk, and $3.0 million and
$28.3 million as of December 30, 2001 and December 29, 2002, respectively, of
commercial paper with maturities of three months or less when acquired which
were assumed to have an average maturity of 45 days. Our restricted cash
equivalents were invested in money market funds and are assumed to have no
interest rate risk since those funds are designed to maintain a stable value.
Our United States government agency debt securities at December 30, 2001
consisted of a single security with a maturity of two years when acquired and
was assumed to have a maturity of two years. Our United States government and
government agency debt securities at December 29, 2002 consisted of several
securities with maturities ranging from ten months to two years when acquired
and had an average remaining maturity of seven months. Our corporate debt
securities consisted almost entirely of short-term commercial paper and had an
average maturity of 180 days and 120 days at December 30, 2001 and December 29,
2002, respectively. Our asset-backed securities had expected maturities ranging
from less than two years to thirty years when acquired and had an average
remaining maturity of eight and three-quarters years and seven years at December
30, 2001 and December 29, 2002, respectively. Our debt mutual fund had
underlying investments with an average duration of approximately two years and
one and one-half years at December 30, 2001 and December 29, 2002, respectively,
and accordingly, was assumed to have an average maturity of two years and one
and one-

                                                                              41







half years at December 30, 2001 and December 29, 2002, respectively. Our other
investments, principally investment limited partnerships and similar investment
entities, included debt securities for which we assumed an average maturity of
ten years. The interest rate risk reflects, for each of these debt investments,
the impact on our results of operations. At the time these securities mature
and, assuming we reinvest in similar securities, the effect of the interest rate
risk of one percentage point above their levels at December 30, 2001 and
December 29, 2002 would continue beyond the maturities assumed.

    The interest rate risk presented with respect to our long-term debt,
excluding capitalized lease obligations relates only to our fixed-rate debt and
represents the potential impact the indicated change has on the fair value of
this debt and not on our financial position or our results of operations. The
fair value of our variable-rate debt approximates the carrying value since the
floating rate resets monthly. However, as discussed above under 'Interest Rate
Risk,' we have an interest rate swap agreement but with an embedded written call
option on our variable-rate debt. As interest rates decrease, the fair market
values of the interest rate swap agreement and the written call option both
decrease, but not necessarily by the same amount. The interest rate risk
presented with respect to the interest rate swap agreement represents the
potential impact the indicated change has on the net fair value of the swap
agreement and embedded written call option and on our financial position and
results of operations.

    For investments in investment limited partnerships and similar investment
entities accounted for at cost and other non-current investments which trade in
public markets included in 'Other investments' in the tables above, the decrease
in the equity markets and the change in foreign currency were assumed for this
analysis to be other than temporary. To the extent such entities invest in
convertible bonds which trade primarily on the conversion feature of the
securities rather than on the stated interest rate, this analysis assumed equity
price risk and no interest rate risk. Further, this analysis assumed no market
risk for other investments, other than investment limited partnerships and
similar investment entities and other non-current investments which trade in
public equity markets. This analysis also assumes an instantaneous 10% change in
the foreign currency exchange rates versus the United States dollar from their
respective levels at December 30, 2001 and December 29, 2002, with all other
variables held constant. The foreign currency risk presented excludes those
investments where the investment manager has fully hedged the risk.

    We also had a written call option on our class A common stock which
effectively arose upon the assumption of our zero coupon convertible debentures
by the purchaser of our former beverage businesses, which remained convertible
into our class A common stock until February 8, 2003, when it ceased to exist
without any of our class A common stock being called under the option. The
equity risk presented with respect to this written call option as of December
30, 2001 represented the potential impact of an instantaneous 10% increase in
the price of our class A common stock on the fair value of the written call
option and on our financial position and results of operations. The fair value
of this written call option was less than $1,000 as of December 29, 2002 and, as
a result, the associated equity risk was not significant.

42










ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS



                                                              PAGE
                                                              ----
                                                           
Independent Auditors' Report................................   44
Consolidated Balance Sheets as of December 30, 2001 and
  December 29, 2002.........................................   45
Consolidated Income Statements for the years ended
  December 31, 2000, December 30, 2001 and
  December 29, 2002.........................................   46
Consolidated Statements of Stockholders' Equity (Deficit)
  for the years ended December 31, 2000,
  December 30, 2001 and December 29, 2002...................   47
Consolidated Statements of Cash Flows for the years ended
  December 31, 2000, December 30, 2001 and
  December 29, 2002.........................................   50
Notes to Consolidated Financial Statements..................   53


                                                                              43







                          INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Stockholders of
TRIARC COMPANIES, INC.:
New York, New York

    We have audited the accompanying consolidated balance sheets of Triarc
Companies, Inc. and subsidiaries (the 'Company') as of December 29, 2002 and
December 30, 2001, and the related consolidated income statements, statements of
stockholders' equity (deficit) and statements of cash flows for each of the
three years in the period ended December 29, 2002. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.

    We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

    In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of the Company as of December 29,
2002 and December 30, 2001 and the results of their operations and their cash
flows for each of the three years in the period ended December 29, 2002 in
conformity with accounting principles generally accepted in the United States of
America.

    As discussed in Notes 1 and 9 to the consolidated financial statements,
effective December 31, 2001 the Company changed its method of accounting for
goodwill in accordance with Statement of Financial Accounting Standards
No. 142.

DELOITTE & TOUCHE LLP

New York, New York
March 27, 2003

44










TRIARC COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS EXCEPT SHARE DATA)



                                                              DECEMBER 30,   DECEMBER 29,
                                                                  2001           2002
                                                                  ----           ----
                                                                       
ASSETS
Current assets:
    Cash (including cash equivalents of $489,978 and
      $449,005) (Note 6)....................................    $ 506,461      $457,472
    Short-term investments (Note 5).........................      153,401       175,161
    Receivables (Notes 6 and 23)............................       14,969        12,967
    Inventories (Note 6)....................................        --            2,274
    Deferred income tax benefit (Note 13)...................       11,495        15,934
    Prepaid expenses and other current assets...............        3,435         7,082
                                                                ---------      --------
        Total current assets................................      689,761       670,890
Restricted cash equivalents (Note 7)........................       32,506        32,476
Investments (Note 8)........................................       42,074        34,717
Properties (Note 6).........................................       60,989       115,224
Goodwill (Note 9)...........................................       17,922        90,689
Other intangible assets (Note 9)............................        5,472         8,291
Deferred costs and other assets (Notes 6 and 23)............       19,685        16,604
                                                                ---------      --------
                                                                $ 868,409      $968,891
                                                                ---------      --------
                                                                ---------      --------

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
    Current portion of long-term debt (Note 10).............    $  24,768      $ 34,422
    Accounts payable........................................        2,941        18,998
    Accrued expenses (Note 6)...............................       73,453        73,949
    Net current liabilities relating to discontinued
      operations (Note 18)..................................       31,962        33,083
                                                                ---------      --------
        Total current liabilities...........................      133,124       160,452
Long-term debt (Note 10)....................................      288,955       352,700
Deferred compensation payable to related parties (Note 15)..       24,356        25,706
Deferred income taxes (Note 13).............................       69,606        60,967
Other liabilities, deferred income and minority interests in
  a consolidated subsidiary (Notes 6, 11, 20, 21 and 22)....       19,971        36,324
Commitments and contingencies (Notes 2, 3, 10, 13, 20, 21,
  22, 23 and 24)
Stockholders' equity (Note 14):
    Class A common stock, $.10 par value; shares authorized:
      100,000,000; shares issued: 29,550,663................        2,955         2,955
    Class B common stock, $.10 par value; shares authorized:
      100,000,000; shares issued and outstanding: none......        --           --
    Additional paid-in capital..............................      129,608       131,708
    Retained earnings.......................................      359,652       360,995
    Common stock held in treasury...........................     (160,639)     (162,084)
    Accumulated other comprehensive income (deficit)........          821          (832)
                                                                ---------      --------
        Total stockholders' equity..........................      332,397       332,742
                                                                ---------      --------
                                                                $ 868,409      $968,891
                                                                ---------      --------
                                                                ---------      --------


          See accompanying notes to consolidated financial statements.

                                                                              45







TRIARC COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)



                                                                        YEAR ENDED
                                                        ------------------------------------------
                                                        DECEMBER 31,   DECEMBER 30,   DECEMBER 29,
                                                            2000           2001           2002
                                                            ----           ----           ----
                                                                             
Revenues, investment income and other income:
    Royalties and franchise and related fees..........    $ 87,450       $ 92,823       $ 97,782
    Investment income, net (Notes 16 and 23)..........      30,715         33,632            851
    Gain (loss) on sale of businesses (Note 24).......      --                500         (1,218)
    Other income, net (Notes 17 and 23)...............       1,241         10,191          1,358
                                                          --------       --------       --------
        Total revenues, investment income and other
          income......................................     119,406        137,146         98,773
                                                          --------       --------       --------
Costs and expenses:
    General and administrative (Notes 14, 20 and 23)..      80,518         77,355         75,893
    Depreciation and amortization, excluding
      amortization of deferred financing costs........       5,313          6,506          6,550
    Capital market transaction related compensation
      (Note 15).......................................      26,010         --             --
    Interest expense (Notes 10 and 11)................       4,804         30,447         26,210
    Insurance expense related to long-term debt
      (Note 10).......................................         550          4,805          4,516
    Costs of proposed business acquisitions not
      consummated.....................................      --                623          2,238
                                                          --------       --------       --------
        Total costs and expenses......................     117,195        119,736        115,407
                                                          --------       --------       --------
            Income (loss) from continuing operations
              before income taxes and minority
              interests...............................       2,211         17,410        (16,634)
Benefit from (provision for) income taxes (Note 13)...     (12,368)        (8,696)         3,329
Minority interests in loss of a consolidated
  subsidiary..........................................      --                252          3,548
                                                          --------       --------       --------
            Income (loss) from continuing operations..     (10,157)         8,966         (9,757)
                                                          --------       --------       --------
Income (loss) from discontinued operations, net of
  income taxes (Note 18):
    Loss from operations..............................      (8,868)        --             --
    Gain on disposal..................................     480,946         43,450         11,100
                                                          --------       --------       --------
        Total income from discontinued operations.....     472,078         43,450         11,100
                                                          --------       --------       --------
            Income before extraordinary charges.......     461,921         52,416          1,343
Extraordinary charges (Note 19).......................     (20,680)        --             --
                                                          --------       --------       --------
            Net income................................    $441,241       $ 52,416       $  1,343
                                                          --------       --------       --------
                                                          --------       --------       --------
Basic income (loss) per share (Note 4):
            Continuing operations.....................    $   (.44)      $    .42       $   (.48)
            Discontinued operations...................       20.32           2.02            .54
            Extraordinary charges.....................        (.89)        --             --
                                                          --------       --------       --------
            Net income................................    $  18.99       $   2.44       $    .06
                                                          --------       --------       --------
                                                          --------       --------       --------
Diluted income (loss) per share (Note 4):
            Continuing operations.....................    $   (.44)      $    .40       $   (.48)
            Discontinued operations...................       20.32           1.91            .54
            Extraordinary charges.....................        (.89)        --             --
                                                          --------       --------       --------
            Net income................................    $  18.99       $   2.31       $    .06
                                                          --------       --------       --------
                                                          --------       --------       --------


          See accompanying notes to consolidated financial statements.

46










TRIARC COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(IN THOUSANDS)



                                                RETAINED      COMMON      COMMON
                                 ADDITIONAL     EARNINGS       STOCK      STOCK
                        COMMON    PAID-IN     (ACCUMULATED    HELD IN     TO BE       UNEARNED
                        STOCK     CAPITAL       DEFICIT)     TREASURY    ACQUIRED   COMPENSATION
                        -----     -------       --------     --------    --------   ------------
                                                                  
Balance at January 2,
 2000.................  $3,555    $204,231     $ (90,680)    $(202,625)  $(86,186)      $(61)
   Comprehensive
     income (loss):
     Net income.......   --         --           441,241        --         --            --
     Unrealized losses
      on available-for-
      sale investments
      (Note 5)........   --         --            --            --         --            --
     Net change in
      currency
      translation
      adjustment......   --         --            --            --         --            --
     Unrecognized
      pension loss
      (Note 20).......   --         --            --            --         --            --
     Comprehensive
      income..........   --         --            --            --         --            --
   Repurchases of
     common stock for
     treasury from
     certain officers
     and a director
     with related
     recognition of
     compensation
     (Note 14)........   --         10,422        --           (25,942)    --            --
   Common stock
     acquired under
     forward purchase
     obligation
     (Note 14)........   --         --            --           (42,373)   42,343         --
   Issuance of common
     stock from
     treasury upon
     exercises of
     stock options
     (Note 14)........   --         (5,338)       --            28,009     --            --
   Tax benefit from
     exercises of
     stock options....   --          1,263        --            --         --            --
   Equity in the
     issuance of
     Snapple Beverage
     Group, Inc. below
     market stock
     options (Note 14)   --          1,157        --            --         --            --
   Modification of
     stock option
     terms (Note 14)..   --            491        --            --         --            --
   Amortization of
     below market
     stock options
     (Note 14)........   --         --            --            --         --             61
   Other..............   --           (259)       --               159     --            --
                        ------    --------     ---------     ---------   --------       ----
Balance at
 December 31, 2000....  $3,555    $211,967     $ 350,561     $(242,772)  $(43,843)      $--
                        ------    --------     ---------     ---------   --------       ----


                                 ACCUMULATED OTHER
                           COMPREHENSIVE INCOME (DEFICIT)
                           ------------------------------
                        UNREALIZED
                          GAIN ON                   UNRECOG-
                        AVAILABLE-     CURRENCY      NIZED
                         FOR-SALE     TRANSLATION   PENSION
                        INVESTMENTS   ADJUSTMENT      LOSS       TOTAL
                        -----------   ----------      ----       -----
                                                   
Balance at January 2,
 2000.................    $ 5,398        $(358)      $--       $(166,726)
   Comprehensive
     income (loss):
     Net income.......     --            --           --         441,241
     Unrealized losses
      on available-for-
      sale investments
      (Note 5)........     (2,322)       --           --          (2,322)
     Net change in
      currency
      translation
      adjustment......     --              322        --             322
     Unrecognized
      pension loss
      (Note 20).......     --            --           (198)         (198)
                                                               ---------
     Comprehensive
      income..........     --            --           --         439,043
                                                               ---------
   Repurchases of
     common stock for
     treasury from
     certain officers
     and a director
     with related
     recognition of
     compensation
     (Note 14)........     --            --           --         (15,520)
   Common stock
     acquired under
     forward purchase
     obligation
     (Note 14)........     --            --           --             (30)
   Issuance of common
     stock from
     treasury upon
     exercises of
     stock options
     (Note 14)........     --            --           --          22,671
   Tax benefit from
     exercises of
     stock options....     --            --           --           1,263
   Equity in the
     issuance of
     Snapple Beverage
     Group, Inc. below
     market stock
     options (Note 14)     --            --           --           1,157
   Modification of
     stock option
     terms (Note 14)..     --            --           --             491
   Amortization of
     below market
     stock options
     (Note 14)........     --            --           --              61
   Other..............     --            --           --            (100)
                          -------        -----       -----     ---------
Balance at
 December 31, 2000....    $ 3,076        $ (36)      $(198)    $ 282,310
                          -------        -----       -----     ---------


                                                                              47







TRIARC COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) -- CONTINUED
(IN THOUSANDS)



                                                                                                    ACCUMULATED OTHER
                                                                                              COMPREHENSIVE INCOME (DEFICIT)
                                                                                              ------------------------------
                                                                                             UNREALIZED
                                                         RETAINED      COMMON      COMMON     GAIN ON                 UNRECOG-
                                          ADDITIONAL     EARNINGS       STOCK      STOCK     AVAILABLE-   CURRENCY     NIZED
                                 COMMON    PAID-IN     (ACCUMULATED    HELD IN     TO BE      FOR-SALE    TRANSLATION PENSION
                                 STOCK     CAPITAL       DEFICIT)     TREASURY    ACQUIRED   INVESTMENTS  ADJUSTMENT    LOSS
                                 -----     -------       --------     --------    --------   -----------  ----------    ----
                                                                                                
Balance at December 31, 2000...  $3,555    $211,967      $350,561     $(242,772)  $(43,843)    $ 3,076       $(36)      $(198)
   Comprehensive income (loss):
     Net income................   --         --            52,416        --         --          --             --         --
     Unrealized losses on
       available-for-sale
       investments (Note 5)....   --         --            --            --         --          (2,090)        --         --
     Net change in currency
       translation adjustment..   --         --            --            --         --          --             15         --
     Recovery of unrecognized
       pension loss (Note 20)..   --         --            --            --         --          --             --          54
     Comprehensive income......   --         --            --            --         --          --             --         --
   Repurchases of common stock
     for treasury (Note 14)....   --         --            --            (7,190)    --          --             --         --
   Common stock acquired under
     forward purchase
     obligation (Note 14)......   --         --            --           (43,843)   43,843       --             --         --
   Issuance of common stock
     from treasury upon
     exercises of stock options
     (Note 14).................   --           (233)       --             5,910     --          --             --         --
   Tax benefit from exercises
     of stock options..........   --            581        --            --         --          --             --         --
   Cancellation of former
     class B common stock
     (Note 14).................   (600)     (83,211)      (43,325)      127,136     --          --             --         --
   Modification of stock option
     terms (Note 14)...........   --            462        --            --         --          --             --         --
   Other.......................   --             42        --               120     --          --             --         --
                                 ------    --------      --------     ---------   --------     -------        ----      -----
Balance at December 30, 2001...  $2,955    $129,608      $359,652     $(160,639)  $ --         $   986       $(21)      $(144)
                                 ------    --------      --------     ---------   --------     -------        ----      -----



                                  TOTAL
                                  -----
                              
Balance at December 31, 2000...  $282,310
   Comprehensive income (loss):
     Net income................    52,416
     Unrealized losses on
       available-for-sale
       investments (Note 5)....    (2,090)
     Net change in currency
       translation adjustment..        15
     Recovery of unrecognized
       pension loss (Note 20)..        54
                                 --------
     Comprehensive income......    50,395
                                 --------
   Repurchases of common stock
     for treasury (Note 14)....    (7,190)
   Common stock acquired under
     forward purchase
     obligation (Note 14)......     --
   Issuance of common stock
     from treasury upon
     exercises of stock options
     (Note 14).................     5,677
   Tax benefit from exercises
     of stock options..........       581
   Cancellation of former
     class B common stock
     (Note 14).................     --
   Modification of stock option
     terms (Note 14)...........       462
   Other.......................       162
                                 --------
Balance at December 30, 2001...  $332,397
                                 --------


48







TRIARC COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) -- CONTINUED
(IN THOUSANDS)



                                                                                          ACCUMULATED OTHER
                                                                                    COMPREHENSIVE INCOME (DEFICIT)
                                                                                    ------------------------------
                                                                                  UNREALIZED
                                                         RETAINED      COMMON       GAIN ON                  UNRECOG-
                                          ADDITIONAL     EARNINGS       STOCK     AVAILABLE-    CURRENCY      NIZED
                                 COMMON    PAID-IN     (ACCUMULATED    HELD IN     FOR-SALE    TRANSLATION   PENSION
                                 STOCK     CAPITAL       DEFICIT)     TREASURY    INVESTMENTS  ADJUSTMENT     LOSS     TOTAL
                                 -----     -------       --------     --------    -----------  ----------     ----     -----
                                                                                              
Balance at December 30, 2001...  $2,955    $129,608      $359,652     $(160,639)     $ 986         $(21)     $(144)  $332,397
   Comprehensive loss:
     Net income................   --         --             1,343        --          --           --            --      1,343
     Unrealized losses on
       available-for-sale
       investments (Note 5)....   --         --            --            --           (826)       --            --       (826)
     Net change in currency
       translation adjustment..   --         --            --            --          --             (43)        --        (43)
     Unrecognized pension loss
       (Note 20)...............   --         --            --            --          --           --          (784)      (784)
                                                                                                                      -------
     Comprehensive loss........   --         --            --            --          --           --            --       (310)
                                                                                                                      -------
   Repurchases of common stock
     for treasury (Note 14)....   --         --            --            (6,987)     --           --            --     (6,987)
   Issuance of common stock
     from treasury upon
     exercises of stock options
     (Note 14).................   --            680        --             5,447      --           --            --      6,127
   Tax benefit from exercises
     of stock options..........   --            723        --            --          --           --            --        723
   Equity in forgiveness of
     debt of an equity investee
     (Note 8)..................   --            393        --            --          --           --            --        393
   Modification of stock option
     terms (Note 14)...........   --            275        --            --          --           --            --        275
   Other.......................   --             29        --                95      --           --            --        124
                                 ------    --------      --------     ---------      -----         ----      -----   --------
Balance at December 29, 2002...  $2,955    $131,708      $360,995     $(162,084)     $ 160         $(64)     $(928)  $332,742
                                 ------    --------      --------     ---------      -----         ----      -----   --------
                                 ------    --------      --------     ---------      -----         ----      -----   --------


          See accompanying notes to consolidated financial statements.

                                                                              49










TRIARC COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)



                                                                              YEAR ENDED
                                                              ------------------------------------------
                                                              DECEMBER 31,   DECEMBER 30,   DECEMBER 29,
                                                                  2000           2001           2002
                                                                  ----           ----           ----
                                                                                   
Cash flows from continuing operating activities:
   Net income...............................................   $ 441,241      $  52,416      $   1,343
   Adjustments to reconcile net income to net cash provided
     by (used in) continuing operating activities:
       Operating investment adjustments, net (see below)....      (4,715)       (17,365)        17,635
       Depreciation and amortization of properties..........       3,394          4,478          5,653
       Amortization of goodwill.............................         842            842         --
       Amortization of other intangible assets and certain
         other items........................................       1,077          1,186            897
       Amortization of deferred financing costs and original
         issue discount.....................................         121          2,066          1,892
       (Recognition) collection of litigation settlement
         receivable.........................................      --             (3,333)         1,667
       Deferred compensation provision......................      --              1,856          1,350
       (Gain) loss on sale of businesses....................      --               (500)         1,218
       Equity in losses (earnings) of investees, net........       2,307            221           (260)
       Minority interests in loss of a consolidated
         subsidiary.........................................      --               (252)        (3,548)
       Deferred income tax provision (benefit)..............       9,745         (1,054)        (1,398)
       Income from discontinued operations..................    (472,078)       (43,450)       (11,100)
       Write-off of unamortized deferred financing costs....      27,491         --             --
       Capital market transaction related compensation......      26,010         --             --
       Compensation expense upon repurchases of common stock
         issued upon exercise of stock options..............      10,422         --             --
       Other, net...........................................         (23)            98            436
       Changes in operating assets and liabilities:
           (Increase) decrease in receivables...............      (2,667)         1,094          1,622
           Decrease in inventories..........................      --             --                 69
           (Increase) decrease in prepaid expenses and other
             current assets.................................         (31)        (2,758)           581
           Increase (decrease) in accounts payable and
             accrued expenses...............................       6,656         (2,042)        (6,056)
                                                               ---------      ---------      ---------
               Net cash provided by (used in) continuing
                 operating activities.......................      49,792         (6,497)        12,001
                                                               ---------      ---------      ---------
Cash flows from continuing investing activities:
   Investment activities, net (see below)...................    (167,843)       148,113        (40,870)
   Sale (purchase) of fractional interests in aircraft......      --              3,000         (1,200)
   Cost of business acquisition less cash acquired of $9,425      --             --               (325)
   Capital expenditures.....................................     (11,955)       (25,386)          (107)
   Other....................................................       1,250           (199)           439
                                                               ---------      ---------      ---------
               Net cash provided by (used in) continuing
                 investing activities.......................    (178,548)       125,528        (42,063)
                                                               ---------      ---------      ---------
Cash flows from continuing financing activities:
   Issuance of long-term debt...............................     289,963         22,590         --
   Repayments of long-term debt.............................      (5,574)       (17,605)       (24,321)
   Repayments of debt and accrued interest related to
     acquisition of a business..............................      --             --             (6,343)
   Repurchases of common stock for treasury.................     (68,315)       (51,033)        (6,987)
   Exercises of stock options...............................      22,671          5,677          6,127
   Deferred financing costs.................................     (12,445)          (605)        --
   Transfers to (from) restricted cash equivalents..........     (30,745)         1,288            376
                                                               ---------      ---------      ---------
               Net cash provided by (used in) continuing
                 financing activities.......................     195,555        (39,688)       (31,148)
                                                               ---------      ---------      ---------
Net cash provided by (used in) continuing operations........      66,799         79,343        (61,210)
Net cash provided by (used in) discontinued operations......     401,493       (169,017)        12,221
                                                               ---------      ---------      ---------
Net increase (decrease) in cash and cash equivalents........     468,292        (89,674)       (48,989)
Cash and cash equivalents at beginning of year..............     127,843        596,135        506,461
                                                               ---------      ---------      ---------
Cash and cash equivalents at end of year....................   $ 596,135      $ 506,461      $ 457,472
                                                               ---------      ---------      ---------
                                                               ---------      ---------      ---------


50







TRIARC COMPANIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS -- CONTINUED
(IN THOUSANDS)



                                                                              YEAR ENDED
                                                              ------------------------------------------
                                                              DECEMBER 31,   DECEMBER 30,   DECEMBER 29,
                                                                  2000           2001           2002
                                                                  ----           ----           ----
                                                                                   
Detail of cash flows related to investments:
   Operating investment adjustments, net:
       Proceeds from sales of trading securities............   $  61,271      $  88,461      $  51,235
       Cost of trading securities purchased.................     (52,533)       (96,253)       (46,005)
       Net recognized (gains) losses from trading securities
         and short positions in securities..................        (574)        (1,595)           603
       Other net recognized (gains) losses, including other
         than temporary losses, and equity in investment
         limited partnerships...............................     (12,858)           (73)        11,159
       Net amortization of premium (accretion of discount)
         on debt securities.................................         (21)        (7,905)           643
                                                               ---------      ---------      ---------
                                                               $  (4,715)     $ (17,365)     $  17,635
                                                               ---------      ---------      ---------
                                                               ---------      ---------      ---------
   Investing investment activities, net:
       Proceeds from sales and maturities of
         available-for-sale securities and other investments   $ 150,307      $ 299,906      $  78,831
       Cost of available-for-sale securities and other
         investments purchased..............................    (314,368)      (157,026)      (118,260)
       Proceeds of securities sold short....................      42,922         30,449         36,418
       Payments to cover short positions in securities......     (46,704)       (25,216)       (37,859)
                                                               ---------      ---------      ---------
                                                               $(167,843)     $ 148,113      $ (40,870)
                                                               ---------      ---------      ---------
                                                               ---------      ---------      ---------
Supplemental disclosures of cash flow information:
   Cash paid during the year in continuing operations for:
       Interest.............................................   $   3,911      $  26,495      $  22,785
                                                               ---------      ---------      ---------
                                                               ---------      ---------      ---------
       Income taxes, net of refunds.........................   $   1,360      $   1,816      $   1,739
                                                               ---------      ---------      ---------
                                                               ---------      ---------      ---------


    Due to their noncash nature, the following transactions are not reflected in
the respective consolidated statements of cash flows (amounts in whole shares
and dollars):

    On January 19, 2000, in addition to a cash payment of $9,210,000 included in
'Capital expenditures,' the Company assumed an $18,000,000 secured promissory
note in connection with the acquisition of 280 Holdings, LLC, which owns an
airplane previously leased by the Company. Such $18,000,000 was reported as an
addition to 'Properties' with an offsetting increase in long-term debt,
including current portion. See Note 23 for further disclosure of this
transaction.

    In connection with the October 25, 2000 sale of the Company's beverage
businesses and the related assumption by the purchaser of the Company's
convertible debt, the Company effectively established a written call option on
the Company's common stock relating to the conversion feature of such debt. The
fair value of the written call option of $1,476,000 as of October 25, 2000 was
recorded as a reduction of the gain on the sale of the beverage businesses
included in discontinued operations with an equal offsetting credit to 'Other
liabilities, deferred income and minority interests in a consolidated
subsidiary.' The reduction in the fair value of the written call option during
the period October 26, 2000 to December 31, 2000 and for the years ended
December 30, 2001 and December 29, 2002 was reported as a component of 'Other
income, net.' See Note 14 for further disclosure of this transaction.

    In October 2001, the Company eliminated and effectively canceled the
previously authorized 25,000,000 shares of its former class B common stock, all
outstanding shares of which had been repurchased by the Company. As a result of
the effective cancellation of the 5,997,622 shares of the former class B common
stock repurchased, the Company recorded an entry within stockholders' equity
which reduced 'Common stock' by $600,000, 'Additional paid-in capital' by
$83,211,000, 'Retained earnings' by $43,325,000 and 'Common stock held in
treasury' by $127,136,000. See Note 14 for further disclosure of this
transaction.

                                                                              51







TRIARC COMPANIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS -- CONTINUED

    On December 27, 2002, the Company purchased all of the voting equity
interests of Sybra, Inc. for $9,750,000, including estimated fees and expenses
of $1,470,000. The purchase price, less cash of Sybra, Inc. of $9,425,000,
resulted in a net use of the Company's cash of $325,000. In conjunction with the
acquisition, liabilities were assumed as follows (in thousands):

                                                           
      Fair value of assets acquired, excluding cash acquired......  $153,342
      Net cash paid for the voting equity interests...............      (325)
                                                                    --------
              Liabilities assumed.................................  $153,017
                                                                    --------
                                                                    --------

      

See Note 3 for further disclosure of this transaction.

          See accompanying notes to consolidated financial statements.

52










TRIARC COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 29, 2002

(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION

    The consolidated financial statements include the accounts of Triarc
Companies, Inc. ('Triarc' and, collectively with its subsidiaries, the
'Company') and its subsidiaries. The principal operating subsidiaries of the
Company, each indirectly wholly-owned as of December 29, 2002, are (1) Arby's,
Inc. ('Arby's'), which, in turn, indirectly owns 100% of Arby's Franchise Trust
('Arby's Trust'), and (2) Sybra, Inc. ('Sybra') which was acquired on December
27, 2002. The Company's other wholly-owned subsidiaries at December 29, 2002
that are referred to herein also include Triarc Acquisition, LLC ('Triarc
Acquisition'), which owns 100% of Triarc Restaurant Holdings, LLC ('TRH'), the
direct parent of Arby's and Sybra; National Propane Corporation ('National
Propane'); SEPSCO, LLC ('SEPSCO'); Citrus Acquisition Corporation which owns
100% of Adams Packing Association, Inc. ('Adams'); and Triarc Consumer Products
Group, LLC ('TCPG'). TCPG owns 100% of RCAC, LLC, into which RC/Arby's
Corporation ('RC/Arby's') was merged and also owned (1) 100% (99.9% prior to
October 25, 2000) of Snapple Beverage Group, Inc. ('Snapple Beverage Group')
which owned 100% of Snapple Beverage Corp. ('Snapple'), Mistic Brands, Inc.
('Mistic') and Stewart's Beverages, Inc. ('Stewart's') and (2) 100% of Royal
Crown Company, Inc. ('Royal Crown'), prior to the October 25, 2000 sale of such
companies. These beverage businesses have been accounted for as discontinued
operations in 2000 through the date of sale. All significant intercompany
balances and transactions have been eliminated in consolidation. See Notes 3 and
18 for further disclosure of the acquisition and disposition referred to above.

FISCAL YEAR

    The Company reports on a fiscal year consisting of 52 or 53 weeks ending on
the Sunday closest to December 31 and each of its 2000, 2001 and 2002 fiscal
years contained 52 weeks. Such periods are referred to herein as (1) 'the year
ended December 31, 2000' or '2000,' which commenced on January 3, 2000 and ended
on December 31, 2000, (2) 'the year ended December 30, 2001' or '2001,' which
commenced on January 1, 2001 and ended on December 30, 2001 and (3) 'the year
ended December 29, 2002' or '2002,' which commenced on December 31, 2001 and
ended on December 29, 2002. December 30, 2001 and December 29, 2002 are referred
to herein as 'Year-End 2001' and 'Year-End 2002,' respectively.

CASH EQUIVALENTS

    All highly liquid investments with a maturity of three months or less when
acquired are considered cash equivalents. The Company typically invests its
excess cash in money market mutual funds, interest-bearing brokerage and bank
accounts with a stable value, commercial paper of high credit-quality entities
and United States government agency debt securities.

INVESTMENTS

Short-Term Investments

    Short-term investments include marketable debt and equity securities with
readily determinable fair values and other short-term investments, including
investments in limited partnerships and similar investment entities, which are
not readily marketable. The Company's marketable securities are classified and
accounted for either as 'available-for-sale' or 'trading' and are reported at
fair market value with the resulting net unrealized holding gains or losses, net
of income taxes, reported as a separate component of comprehensive income (loss)
bypassing net income (loss) or included as a component of net income (loss),
respectively. The cost or the amount reclassified out of accumulated other
comprehensive income (deficit) into earnings or loss of securities sold for all
marketable securities is determined using the specific identification method.
Other short-term investments that are not readily marketable consist of
investments in which the Company has significant

                                                                              53







TRIARC COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
DECEMBER 29, 2002

influence over the operating and financial policies of the investees ('Equity
Investments') and investments in which the Company does not have significant
influence over the investees ('Cost Investments'). Equity Investments are
accounted for in accordance with the equity method (the 'Equity Method') under
which each such investment is reported at cost plus the Company's proportionate
share of the income or loss or other changes in stockholders' equity of each
such investee since its acquisition. The consolidated results of operations
include such proportionate share of income or loss. The carrying value of the
Company's investment in each of its short-term Equity Investments is equal to
the underlying equity in net assets of each investee. Cost Investments are
accounted for using the cost method (the 'Cost Method').

Non-Current Investments

    The Company's non-current investments consist of Equity Investments which
are accounted for in accordance with the Equity Method and Cost Investments
which are accounted for under the Cost Method. Prior to December 31, 2001, the
excess, if any, of the carrying value of the Company's non-current Equity
Investments over the underlying equity in net assets (the 'Excess Carrying
Value') of each investee at the time of their acquisition was amortized to
equity in earnings or losses of investees included in 'Other income, net' (see
Note 17) on a straight-line basis over 15 years until the carrying value of
those Equity Investments had been reduced to less than the underlying equity
(see Note 8).

    Effective December 31, 2001, the Company adopted Statement of Financial
Accounting Standards ('SFAS') No. 142 ('SFAS 142'), 'Goodwill and Other
Intangible Assets.' In accordance therewith, the Excess Carrying Value, if any,
is no longer amortized.

    See Note 8 for a further disclosure of the Company's non-current
investments.

Securities Sold With an Obligation to Purchase

    Securities sold with an obligation to purchase are reported at fair market
value with the resulting net unrealized gains or losses included as a component
of net income (loss).

All Investments

    The Company reviews all of its investments in which the Company has
unrealized losses and recognizes an investment loss for any such unrealized
losses deemed to be other than temporary ('Other Than Temporary Losses') with a
corresponding permanent reduction in the cost basis component of the
investments. With respect to available-for-sale securities, the effect of the
permanent reduction in the cost basis is an increase in the unrealized gain or a
decrease in the unrealized loss on the available-for-sale investments component
of 'Comprehensive income (loss).' With respect to Equity Investments, the effect
of the permanent reduction in the cost basis is a reduction of the cost
component of the carrying value of the investment.

Gain on Issuance of Investee Stock

    The Company recognizes a gain or loss upon sale of any previously unissued
stock by an Equity Investment to third parties to the extent of the decrease in
the Company's ownership of the investee. However, a gain is recognized only when
realization of the gain by the Company is reasonably assured.

INVENTORIES

    The Company's inventories are stated at the lower of cost or market with
cost determined in accordance with the first-in, first-out method.

54







TRIARC COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
DECEMBER 29, 2002

PROPERTIES AND DEPRECIATION AND AMORTIZATION

    Properties are stated at cost less accumulated depreciation and
amortization. Depreciation and amortization of properties is computed
principally on the straight-line basis using the estimated useful lives of the
related major classes of properties: 3 to 15 years for office, restaurant and
transportation equipment and 40 years for buildings. Leased assets capitalized
and leasehold improvements are amortized over the shorter of their estimated
useful lives or the terms of the respective leases.

AMORTIZATION OF INTANGIBLES

    Goodwill, representing the costs in excess of net assets of acquired
companies, was amortized on the straight-line basis over 15 to 40 years until
December 30, 2001, after which such amortization ceased upon the adoption of
SFAS 142. Other intangible assets are amortized on the straight-line basis using
the estimated useful lives of the related classes of intangibles: 15 years for
trademarks and distribution rights and 3 years for computer software costs. A
non-compete agreement, which became fully amortized during 2001, was amortized
over 5 years. Deferred financing costs and original issue debt discount are
being amortized as interest expense over the lives of the respective debt using
the interest rate method.

    See Note 9 for further information with respect to the Company's goodwill
and other intangible assets.

IMPAIRMENTS

Goodwill

    Through the year ended December 30, 2001, the amount of impairment, if any,
in unamortized goodwill was measured based on projected future operating
performance. As the future operating performance of the enterprise (Arby's) to
which the goodwill related through the period such goodwill was being amortized
was sufficient to absorb the related amortization, the Company deemed there to
be no impairment of goodwill.

    Effective with the adoption of SFAS 142 as of December 31, 2001, the amount
of impairment, if any, in unamortized goodwill is measured by the excess, if
any, of the carrying amount of the unamortized goodwill over its implied fair
value. SFAS 142 requires that goodwill be tested for impairment at least
annually. The Company has determined that there was no impairment of goodwill
upon adoption of SFAS 142 and as of the first annual testing date.

Long-Lived Assets

    The Company reviews its long-lived assets other than goodwill for impairment
whenever events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable. If such review indicates an asset may not be
recoverable, an impairment loss is recognized for the excess of the carrying
amount over the fair value of an asset to be held and used or over the fair
value less cost to sell of an asset to be disposed. The Company has determined
that for the year ended December 29, 2002 all of its long-lived assets that
required testing for impairment were recoverable and did not require the
recognition of any associated impairment loss.

DERIVATIVE FINANCIAL INSTRUMENTS

    The Company's derivatives consist of (1) the conversion component of
short-term investments in corporate convertible debt securities which are
accounted for as trading securities, (2) put and call options on equity and
corporate debt securities which are accounted for as trading securities, (3) an
interest rate swap agreement in connection with a secured bank term loan and (4)
a written call option on Triarc's common stock with physical settlement. In
addition, prior to August 10, 2001 the Company's derivatives included a forward
purchase obligation for Triarc's common stock with cash settlement (see Note
14). The conversion component of corporate convertible debt securities, put and
call options on equity and corporate debt securities, the interest

                                                                              55







TRIARC COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
DECEMBER 29, 2002

rate swap agreement and the call option on Triarc's common stock with physical
settlement are recorded at fair value with changes in fair value recorded in the
Company's results of operations. The forward purchase obligation for Triarc's
common stock with cash settlement was recorded at the cash redemption amount. As
of February 8, 2003, the written call option on Triarc's common stock ceased to
exist without any Triarc common stock being called under the option (see Note
14). See Note 11 for further disclosure of the Company's derivative financial
instruments.

STOCK-BASED COMPENSATION

    The Company measures compensation costs for its employee stock-based
compensation under the intrinsic value method. Accordingly, compensation cost
for the Company's stock options is measured as the excess, if any, of the market
price of the Company's common stock at the date of grant, or at any subsequent
measurement date as a result of certain types of modifications to the terms of
its stock options, over the amount an employee must pay to acquire the stock.
Such amounts are being amortized as compensation expense over the vesting period
of the related stock options. Any compensation cost is recognized as expense
only to the extent it exceeds compensation expense previously recognized for
such stock options. Compensation cost for stock appreciation rights, if any, is
recognized currently based on the change in the market price of the Company's
common stock during each period.

    A summary of the effect on net income (loss) and net income (loss) per share
in each year presented as if the fair value method had been applied to all
outstanding and unvested stock options that were granted commencing January 1,
1995 is as follows (in thousands except per share data):



                                                         2000      2001      2002
                                                         ----      ----      ----
                                                                   
Net income, as reported..............................  $441,241   $52,416   $ 1,343
Reversal of stock-based employee compensation expense
  determined under the intrinsic value method
  included in reported net income, net of related
  income taxes.......................................    11,156       291       173
Recognition of total stock-based employee
  compensation expense determined under the fair
  value method, net of related income taxes..........    (7,772)   (6,101)   (5,092)
                                                       --------   -------   -------
Net income (loss), as adjusted.......................  $444,625   $46,606   $(3,576)
                                                       --------   -------   -------
                                                       --------   -------   -------
Net income (loss) per share:
    Basic, as reported...............................  $  18.99   $  2.44   $   .06
    Basic, as adjusted...............................     19.14      2.17      (.17)
    Diluted, as reported.............................     18.99      2.31       .06
    Diluted, as adjusted.............................     19.14      2.05      (.17)


See Note 14 for disclosure of the adjustments, methods and significant
assumptions used to estimate the fair values of stock options reflected in the
table above.

TREASURY STOCK

    Common stock held in treasury is stated at cost. The cost of issuances of
shares from treasury stock is determined at average cost.

COSTS OF BUSINESS ACQUISITIONS

    The Company defers any costs incurred relating to the pursuit of business
acquisitions while the potential acquisition process is ongoing. Whenever the
acquisition is successful, such costs are included as a component of the
purchase price of the acquired entity. Whenever the Company decides it will no
longer pursue a potential acquisition, any related deferred costs are written
off at that time.

56







TRIARC COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
DECEMBER 29, 2002

FOREIGN CURRENCY TRANSLATION

    Financial statements of foreign subsidiaries are prepared in their
respective local currencies and translated into United States dollars at the
current exchange rates for assets and liabilities and at an average rate for the
year for revenues, costs and expenses. Net gains or losses resulting from the
translation of foreign financial statements, including those of discontinued
operations through their date of disposition, are charged or credited directly
to the 'Currency translation adjustment' component of 'Accumulated other
comprehensive income (deficit)' in the accompanying consolidated statements of
stockholders' equity (deficit).

INCOME TAXES

    The Company files a consolidated Federal income tax return with all of its
subsidiaries. Deferred income taxes are provided to recognize the tax effect of
temporary differences between the bases of assets and liabilities for tax and
financial statement purposes.

REVENUE RECOGNITION

    Franchise fees are recognized as revenue when a franchised restaurant is
opened since all material services and conditions related to the franchise fee
have been substantially performed by the Company upon the restaurant opening.
Franchise fees for multiple area development agreements represent the aggregate
of the franchise fees for the number of restaurants in the area being developed
and are recognized as revenue when each restaurant is opened in the same manner
as franchise fees for individual restaurants. Franchise commitment fee deposits
are forfeited and recognized as revenue upon the termination of the related
commitments to open new franchised restaurants. Royalties are based on a
percentage of restaurant sales of the franchised store and are recognized as
earned.

RECLASSIFICATIONS

    Certain amounts included in the accompanying prior years' consolidated
financial statements and footnotes thereto have been reclassified to conform
with the current year's presentation.

(2) SIGNIFICANT RISKS AND UNCERTAINTIES

NATURE OF OPERATIONS

    The Company franchises and, effective with the acquisition of Sybra on
December 27, 2002 (see Note 3), operates Arby's'r' quick service restaurants
specializing in slow-roasted roast beef sandwiches. Arby's restaurants also
offer an extensive menu of chicken, turkey, ham and submarine sandwiches, side
dishes and salads including Arby's Market Fresh'TM' sandwiches. Some of the
Arby's system-wide restaurants are multi-branded with the Company's T.J.
Cinnamons'r' product line and/or, to a lesser extent, Pasta Connection'r'
product line. The franchised restaurants are principally throughout the United
States and, to a much lesser extent, Canada. The Company's owned restaurants are
located in nine states, primarily Michigan, Texas, Pennsylvania and Florida.
Information concerning the number of Arby's franchised and Company-owned
restaurants is as follows:



                                                             2000    2001    2002
                                                             ----    ----    ----
                                                                    
Franchised restaurants opened..............................    156     131     116
Franchised restaurants closed..............................     65      99      64
Franchised restaurants purchased in the acquisition of
  Sybra (Note 3)...........................................     --      --     239 (a)
Franchised restaurants open at end of year.................  3,319   3,351   3,164
Company-owned restaurants open at end of year..............     --      --     239 (a)
System-wide restaurants open at end of year................  3,319   3,351   3,403


- ---------

 (a) The Company operates these 239 restaurants effective December 28, 2002 as a
     result of the acquisition of Sybra.

                                                                              57







TRIARC COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
DECEMBER 29, 2002

USE OF ESTIMATES

    The preparation of consolidated financial statements in conformity with
accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the consolidated financial statements and the
reported amount of revenues and expenses during the reporting period. Actual
results could differ from those estimates.

SIGNIFICANT ESTIMATES

    The Company's significant estimates which are susceptible to change in the
near term relate to (1) the amount of the post-closing adjustment currently in
arbitration in connection with the Snapple Beverage Sale (see Note 3), (2)
provisions for the resolution of income tax contingencies subject to future
examinations of the Company's Federal and state income tax returns by the
Internal Revenue Service ('IRS') or state taxing authorities, including
remaining provisions included in 'Net current liabilities relating to
discontinued operations,' (see Note 13), (3) provisions for the resolution of
legal and environmental matters (see Note 24), (4) the valuation of investments
which are not publicly traded (see Note 12) and (5) provisions for unrealized
losses on investments deemed to be other than temporary (see Note 16). The
Company's estimates of each of these items historically have been adequate.
However, due to uncertainties inherent in the estimation process, it is
reasonably possible that the actual resolution of any of these items could vary
significantly from the estimate and, accordingly, there can be no assurance that
the estimates may not materially change in the near term.

CERTAIN RISK CONCENTRATIONS

    The Company believes its vulnerability to risk concentrations in its cash
equivalents and investments is mitigated by (1) the Company's policies
restricting the eligibility, credit quality and concentration limits for its
placements in cash equivalents, (2) the diversification of its investments and
(3) to the extent the cash equivalents and investments are held in brokerage
accounts, insurance from the Securities Investor Protection Corporation of up to
$500,000 per account as well as supplemental private insurance coverage
maintained by the brokerage firms covering substantially all of the Company's
accounts. The Company has one significant franchisee which accounted for 27% of
consolidated revenues from royalties and franchise and related fees in each of
2000, 2001 and 2002, the loss of which would have a material adverse impact on
the Company's business. The Company's restaurant operations could also be
adversely affected by changing consumer preferences resulting from health or
safety concerns with respect to the consumption of beef, french fries or certain
other foods. The Company believes that its vulnerability to risk concentrations
related to significant vendors and sources of its raw materials for itself and
its franchisees is not significant. The Company also believes that its
vulnerability to risk concentrations related to geographical concentration is
minimized since the Company and its franchisees generally operate throughout the
United States with minimal foreign exposure.

(3) BUSINESS ACQUISITIONS AND DISPOSITIONS

Acquisition of Sybra

    On December 27, 2002, the Company completed the acquisition of all of the
voting equity interests of Sybra (the 'Sybra Acquisition') from I.C.H.
Corporation ('ICH') under a plan of reorganization confirmed by a United States
Bankruptcy Court. In February 2002, ICH and Sybra had filed for protection under
Chapter 11 of the United States Bankruptcy Code in order to restructure their
financial obligations. Sybra owns and operates 239 Arby's restaurants in nine
states and, prior to the Sybra Acquisition, was the second largest franchisee of
Arby's restaurants. The Company acquired Sybra with the expectation of
strengthening and increasing the value of its Arby's brand. The aggregate
purchase price paid for Sybra by the Company was

58







TRIARC COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
DECEMBER 29, 2002

$9,750,000, consisting of $8,280,000 of payments to ICH's creditors and
$1,470,000 of estimated fees and expenses.

    The allocation of the purchase price of Sybra to the assets acquired and
liabilities assumed at the date of acquisition, on a preliminary basis and
subject to finalization due to the recent date of the acquisition, and a
reconciliation to 'Cost of business acquisition less cash acquired' in the
accompanying consolidated statement of cash flows are summarized in the
following table (in thousands):

                                                           
Current assets..............................................  $ 19,104
Properties..................................................    60,077
Goodwill....................................................    71,960
Other intangible assets.....................................     3,379
Deferred income tax benefit.................................     7,848
Deferred costs and other assets.............................       399
                                                              --------
    Total assets acquired...................................   162,767
                                                              --------
Current liabilities.........................................    31,805
Long-term debt, including current portion...................   103,242
Other liabilities and deferred income.......................    17,970
                                                              --------
    Total liabilities assumed...............................   153,017
                                                              --------
Net assets acquired.........................................     9,750
Less cash acquired..........................................     9,425
                                                              --------
Cost of business acquisition less cash acquired.............  $    325
                                                              --------
                                                              --------



    The Sybra acquisition has resulted in $71,960,000 of goodwill (see Note 9),
of which $17,723,000 is estimated to be deductible for income tax purposes.
Arby's restaurants typically have relatively low levels of receivables and
inventories, as is the case with the Arby's restaurants operated by Sybra, and
Sybra has financed substantially all of its land and buildings, including those
buildings reported in leasehold improvements. As such, Sybra had net liabilities
on its historical financial statements before the allocation of the purchase
price to the assets acquired and liabilities assumed despite the substantial
value of the restaurants. This excess of the purchase price over the net
tangible assets acquired relates in part to the fair value of the franchise
agreements; however, since Arby's is the franchisor of the acquired restaurants
that value is included in goodwill in the Company's consolidated balance sheet
as of December 29, 2002. The only other significant identifiable intangible
asset in accordance with an independent appraisal is $3,274,000 of favorable
leases which are amortizable over the lives of the leases with a weighted
average remaining useful life of 14 years.

    Sybra's results of operations subsequent to the December 27, 2002 date of
the Sybra Acquisition through December 29, 2002 have been included in the
accompanying consolidated income statement for the year ended December 29, 2002.
The results of operations before income taxes have been reported in 'Other
income, net' (see Note 17) for convenience since Sybra's pretax income for that
two-day period is not material to the Company's consolidated income before
income taxes. The pretax income of Sybra consists of the following components
(in thousands):

                                                           
Net sales and other income..................................  $933
Costs and expenses..........................................   918
                                                              ----
    Income before income taxes..............................  $ 15
                                                              ----
                                                              ----



    The following unaudited supplemental pro forma condensed consolidated
summary operating data (the 'As Adjusted Data') of the Company for 2001 and 2002
has been prepared by adjusting the historical data as set forth in the
accompanying consolidated income statements to give effect to the Sybra
Acquisition as if it

                                                                              59







TRIARC COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
DECEMBER 29, 2002

had been consummated on January 1, 2001 and December 31, 2001, respectively (in
thousands except per share amounts):



                                               2001                        2002
                                     -------------------------   -------------------------
                                     AS REPORTED   AS ADJUSTED   AS REPORTED   AS ADJUSTED
                                     -----------   -----------   -----------   -----------
                                                                   
Revenues, investment income and
  other income, net................   $137,146      $327,240       $98,773      $299,886
Income (loss) from continuing
  operations.......................      8,966         5,570        (9,757)      (16,367)
Net income (loss)..................     52,416        49,020         1,343        (5,267)
Basic income (loss) per share:
    Continuing operations..........        .42           .26          (.48)         (.80)
    Net income (loss)..............       2.44          2.28           .06          (.26)
Diluted income (loss) per share:
    Continuing operations..........        .40           .25          (.48)         (.80)
    Net income (loss)..............       2.31          2.16           .06          (.26)


    Such As Adjusted Data is presented for comparative purposes only and does
not purport to be indicative of the Company's actual results of operations had
such acquisition actually been consummated on such dates or of the Company's
future results of operations. The 2001 historical results of Sybra were impacted
by a $2,129,000 pretax charge representing the write-off of costs for
construction in progress for certain Arby's restaurants that were not completed.
In February 2002, Sybra, as discussed above, filed for protection under Chapter
11 of the United States Bankruptcy Code. In 2002, Sybra's historical results
were impacted by a $6,403,000 pretax charge representing expenses incurred by
Sybra directly relating to the bankruptcy, principally for legal fees and, to a
much lesser extent, for other professional fees.

Sale of Beverage Businesses

    On October 25, 2000, the Company sold (the 'Snapple Beverage Sale') Snapple
Beverage Group and Royal Crown to affiliates of Cadbury Schweppes plc
('Cadbury'). Snapple Beverage Group represented the operations of the Company's
former premium beverage business and Royal Crown represented the operations of
the Company's former soft drink concentrate business. Snapple Beverage Group and
Royal Crown are collectively referred to herein as the 'Former Beverage
Businesses.' The consideration paid to the Company consisted of (1) cash, which
may be subject to further post-closing adjustments as described below, and (2)
the assumption by Cadbury of debt and related accrued interest. The assumed debt
and accrued interest consisted of (1) $300,000,000 of 10 1/4% senior
subordinated notes due 2009 (the 'Senior Notes') co-issued by TCPG and Snapple
Beverage Group, (2) $119,130,000, net of unamortized original issue discount of
$240,870,000, of Triarc's zero coupon convertible subordinated debentures due
2018 (the 'Debentures') and (3) $5,982,000 of accrued interest. The Snapple
Beverage Sale resulted in an after-tax gain in 2000 recorded in the 'Gain on
disposal' component of 'Total income from discontinued operations' in the
accompanying consolidated income statement (see Note 18) of $480,946,000,
subject to any additional post-closing purchase price adjustment as described
below, and net of $19,134,000 of related fees and expenses and $226,765,000 of
income tax provision. In 2001 and 2002, the Company recorded additional gains
from the Snapple Beverage Sale of $43,450,000 and $11,100,000, respectively. The
additional gain in 2001 principally resulted from the realization of
$200,000,000 of proceeds from Cadbury for the Company electing (the 'Tax
Election') during 2001 to treat certain portions of the Snapple Beverage Sale as
an asset sale in lieu of a stock sale under the provisions of Section 338(h)(10)
of the United States Internal Revenue Code, net of estimated income taxes,
partially offset by additional accruals relating to the Snapple Beverage Sale.
The additional gain in 2002 resulted from the release of reserves for income
taxes in connection with the receipt of related income tax refunds.

60







TRIARC COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
DECEMBER 29, 2002

    In addition, the Snapple Beverage Sale purchase and sale agreement provides
for a post-closing adjustment, the amount of which is in dispute. Cadbury has
stated that it currently believes that it is entitled to receive from the
Company a post-closing adjustment of $23,189,000 plus interest at 7.19% from
October 25, 2000 while the Company, on the other hand, has stated that it
currently believes that no post-closing adjustment is required. The Company is
in arbitration with Cadbury to determine the amount of the post-closing
adjustment, if any. The Company currently expects the arbitration process to be
completed in 2003.

    In connection with the closing of the Snapple Beverage Sale, in 2000 the
Company repaid the (1) outstanding principal of $436,433,000, (2) related
accrued interest of $1,119,000, (3) related prepayment penalties of $5,509,000
and (4) fees of $57,000 under a senior bank credit facility (the 'Beverage
Credit Facility') maintained by Snapple, Mistic, Stewart's, Royal Crown and
RC/Arby's, the then parent company of Royal Crown.

(4) INCOME (LOSS) PER SHARE

    Basic income (loss) per share for 2000, 2001 and 2002 has been computed by
dividing the income or loss by the weighted average number of common shares
outstanding of 23,232,000, 21,532,000 and 20,446,000, respectively. Diluted
income (loss) per share for 2000 and 2002 is the same as the basic income (loss)
per share since the Company reported a loss from continuing operations and,
therefore, the effect of all potentially dilutive securities on the loss per
share from continuing operations would have been antidilutive. Diluted income
per share for 2001 has been computed by dividing the income by an aggregate
22,692,000 shares which reflect the effect of dilutive stock options of
1,160,000 shares computed using the treasury stock method. The shares used to
calculate diluted income per share for 2001 exclude any effect of (1) a written
call option on Triarc's common stock, which commenced following the assumption
of the Debentures by Cadbury and (2) a forward purchase obligation for Triarc's
common stock through its final settlement on August 10, 2001 since the effect of
each of these on income per share from continuing operations for 2001 would have
been antidilutive (see Note 14). The only Company securities outstanding as of
December 29, 2002 that could dilute basic income per share in years subsequent
to 2002 are the 9,261,421 outstanding stock options (see Note 14).

(5) SHORT-TERM INVESTMENTS AND SECURITIES SOLD WITH AN OBLIGATION TO PURCHASE

SHORT-TERM INVESTMENTS

    The Company's short-term investments are carried at fair market value,
except for Cost Investments and Equity Investments set forth in the table below
(see Note 1). The cost of available-for-sale debt securities represents
amortized cost. The cost of available-for-sale securities and other short-term
investments have also been reduced by any unrealized losses deemed to be other
than temporary (see Note 16). The cost, gross unrealized holding gains and
losses included in accumulated other comprehensive income (deficit), fair value
and carrying amount, as appropriate, of the Company's short-term investments at
December 30, 2001 and December 29, 2002 were as follows (in thousands):

                                                                              61







TRIARC COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
DECEMBER 29, 2002



                                               YEAR-END 2001                                      YEAR-END 2002
                              ---------------------------------------------   -----------------------------------------------
                                          UNREALIZED                                       UNREALIZED
                                            HOLDING                                          HOLDING
                                        --------------    FAIR     CARRYING              ---------------     FAIR    CARRYING
                                COST    GAINS   LOSSES   VALUE      AMOUNT      COST     GAINS    LOSSES    VALUE     AMOUNT
                                ----    -----   ------   -----      ------      ----     -----    ------    -----     ------
                                                                                        
Marketable securities
 Available-for-sale:
   United States government
     and government agency
     debt securities........  $ 29,934  $   75  $ --    $ 30,009   $ 30,009   $ 74,663   $  709   $--      $ 75,372  $ 75,372
   Corporate debt securities    10,157    --      --      10,157     10,157      9,988     --      --         9,988     9,988
   Asset-backed securities..    24,181      13    (11)    24,183     24,183     24,340       10     (18)     24,332    24,332
   Equity securities........    28,706   2,140   (715)    30,131     30,131     26,733      341    (970)     26,104    26,104
   Debt mutual fund.........     7,861      14    --       7,875      7,875      8,196      150    --         8,346     8,346
                              --------  ------  -----   --------   --------   --------   ------   -----    --------  --------
      Total available-for-
        sale marketable
        securities..........   100,839  $2,242  $(726)   102,355    102,355    143,920   $1,210   $(988)    144,142   144,142
                              --------  ------  -----   --------   --------   --------   ------   -----    --------  --------
                                        ------  -----                                    ------   -----
 Trading:
   Equity securities........    22,955                    22,349     22,349     14,129                       11,811    11,811
   Corporate debt securities     4,117                     2,665      2,665      1,222                          601       601
                              --------                  --------   --------   --------                     --------  --------
      Total trading
        securities..........    27,072                    25,014     25,014     15,351                       12,412    12,412
                              --------                  --------   --------   --------                     --------  --------
 Other short-term investments:
   Cost Investments.........    17,235                    25,507     17,235     16,798                       26,032    16,798
   Equity Investments.......     8,250                     8,797      8,797      1,687                        1,809     1,809
                              --------                  --------   --------   --------                     --------  --------
      Total other
        investments.........    25,485                    34,304     26,032     18,485                       27,841    18,607
                              --------                  --------   --------   --------                     --------  --------
                              $153,396                  $161,673   $153,401   $177,756                     $184,395  $175,161
                              --------                  --------   --------   --------                     --------  --------
                              --------                  --------   --------   --------                     --------  --------


    The maturities of United States government and government agency debt
securities, corporate debt securities and asset-backed securities at December
29, 2002 which are classified as available-for-sale at fair value, which is
equal to their carrying value, are as follows (in thousands):

                                                           
Within one year.............................................  $ 92,162
After one year through five years...........................     8,696
After five years through ten years..........................     2,982
After ten years.............................................     3,472
Mortgage-backed securities (classified within asset-backed
  securities above) not due at a single maturity date.......     2,380
                                                              --------
                                                              $109,692
                                                              --------
                                                              --------



    Proceeds from sales and maturities of available-for-sale marketable
securities were $82,392,000, $288,584,000 and $69,444,000 in 2000, 2001 and
2002, respectively. Gross realized gains and gross realized losses on those
sales are included in 'Investment income, net' in the accompanying consolidated
income statements (see Note 16) and are as follows (in thousands):



                                                          2000      2001     2002
                                                          ----      ----     ----
                                                                   
Gross realized gains...................................  $14,441   $3,365   $2,857
Gross realized losses..................................   (8,689)    (483)    (206)
                                                         -------   ------   ------
                                                         $ 5,752   $2,882   $2,651
                                                         -------   ------   ------
                                                         -------   ------   ------


    The net change in the unrealized holding gains on available-for-sale
securities and the equity in an unrealized gain on a retained interest of Encore
Capital Group, Inc., an Equity Investment included in

62







TRIARC COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
DECEMBER 29, 2002

non-current investments (see Note 8), included in other comprehensive income
(loss) consisted of the following (in thousands):



                                                         2000      2001      2002
                                                         ----      ----      ----
                                                                   
Net change in unrealized holding gains or losses on
  available-for-sale securities:
    Net change in unrealized appreciation or
      depreciation of available-for-sale securities
      during the year.................................  $ 4,549   $   (93)  $    38
    Less reclassification of prior year net
      appreciation included in net income or loss.....   (8,098)   (2,881)   (1,332)
                                                        -------   -------   -------
                                                         (3,549)   (2,974)   (1,294)
    Equity in change in unrealized gain on a retained
      interest........................................     (117)     (245)       33
    Income tax benefit................................    1,344     1,129       435
                                                        -------   -------   -------
                                                        $(2,322)  $(2,090)  $  (826)
                                                        -------   -------   -------
                                                        -------   -------   -------


    The change in the net unrealized gain or loss on trading securities resulted
in losses of $4,848,000, $2,033,000 and $883,000 in 2000, 2001 and 2002,
respectively, which are included in 'Investment income, net' in the accompanying
consolidated income statements (see Note 16).

    Other short-term investments represent investments in limited partnerships,
limited liability companies and similar investment entities which invest in
securities that primarily consist of debt securities, common and preferred
equity securities, convertible preferred equity and debt securities, stock
warrants and rights and stock options. These investments are focused on both
domestic and foreign securities. Certain of these investments are, or if sold
during 2002 were, accounted for in accordance with the Equity Method.

SECURITIES SOLD WITH AN OBLIGATION TO PURCHASE

    The Company also enters into short sales of debt and equity securities as
part of its portfolio management strategy. Short sales are commitments to sell
debt and equity securities not owned at the time of sale that require purchase
of the debt and equity securities at a future date. These short sales resulted
in proceeds of $42,922,000, $30,449,000 and $36,418,000 in 2000, 2001 and 2002,
respectively. The change in the net unrealized gains (losses) on securities sold
with an obligation to purchase resulted in income of $4,527,000 and $2,180,000
in 2000 and 2001, respectively, and a loss of $1,020,000 in 2002, which are
included in 'Investment income, net' (see Note 16). The fair value and the
carrying value of the liability for securities sold with an obligation to
purchase were $17,384,000 and $9,168,000 at December 30, 2001 and December 29,
2002, respectively, and are included in 'Accrued expenses' (see Note 6).

(6) BALANCE SHEET DETAIL

CASH

    Cash includes cash equivalents of $15,700,000 and $15,018,000 as of December
30, 2001 and December 29, 2002, respectively, held in a custodial account at a
financial institution which is subject to set off should the Company or certain
other parties not perform under certain debt guarantees (see Note 23). Cash also
includes cash and cash equivalents aggregating $9,201,000 as of December 29,
2002 pledged as collateral for the Company's insured securitization notes (see
Note 10).

                                                                              63







TRIARC COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
DECEMBER 29, 2002

RECEIVABLES

    The following is a summary of the components of receivables (in thousands):



                                                                  YEAR-END
                                                              -----------------
                                                               2001      2002
                                                               ----      ----
                                                                  
Accounts:
    Trade...................................................  $11,359   $10,318
    Affiliates..............................................      210        58
    Other...................................................    2,183     1,816
                                                              -------   -------
                                                               13,752    12,192
                                                              -------   -------
Notes:
    Trade...................................................    1,060       367
    Affiliates (a)..........................................    1,667     1,667
                                                              -------   -------
                                                                2,727     2,034
                                                              -------   -------
                                                               16,479    14,226
                                                              -------   -------
Less allowance for doubtful accounts:
    Trade accounts..........................................      450       699
    Other accounts..........................................    --          193
    Trade notes.............................................    1,060       367
                                                              -------   -------
                                                                1,510     1,259
                                                              -------   -------
                                                              $14,969   $12,967
                                                              -------   -------
                                                              -------   -------


- ---------

 (a) Represents the current portion of a note receivable from the Chairman and
     Chief Executive Officer and the President and Chief Operating Officer of
     the Company (the 'Executives') pursuant to a litigation settlement (see
     Note 23).

    The following is an analysis of the allowance for doubtful accounts (in
thousands):



                                                          2000     2001     2002
                                                          ----     ----     ----
                                                                  
Balance at beginning of year...........................  $1,371   $1,172   $1,510
Provision for doubtful accounts:
    Trade accounts.....................................     292      479      331
    Other accounts.....................................    --       --        235
    Trade notes........................................    --       --       (693)(a)
                                                         ------   ------   ------
                                                            292      479     (127)
                                                         ------   ------   ------
Uncollectible accounts written off:
    Trade accounts.....................................    (491)    (141)     (82)
    Other accounts.....................................    --       --        (42)
                                                         ------   ------   ------
                                                           (491)    (141)    (124)
                                                         ------   ------   ------
Balance at end of year.................................  $1,172   $1,510   $1,259
                                                         ------   ------   ------
                                                         ------   ------   ------


- ---------

 (a) Represents the reversal upon realization in 2002 of collections related to
     two fully-reserved notes receivable from franchisees.

    Certain trade receivables with an aggregate net book value of $6,297,000 as
of December 29, 2002 are pledged as collateral for the Company's insured
securitization notes (see Note 10).

64







TRIARC COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
DECEMBER 29, 2002

INVENTORIES

    Inventories consist principally of food, beverage and paper inventories and
are classified entirely as raw materials. Certain inventories aggregating
$2,114,000 as of December 29, 2002 are pledged as collateral for certain debt
(see Note 10).

PROPERTIES

    The following is a summary of the components of properties (in thousands):



                                                                   YEAR-END
                                                              ------------------
                                                               2001       2002
                                                               ----       ----
                                                                  
Owned:
    Land....................................................  $   753   $  1,607
    Buildings and improvements..............................    --         1,080
    Office, restaurant and transportation equipment.........   66,667     87,463
    Leasehold improvements..................................    9,637     43,948
Leased assets capitalized...................................    --         1,760
                                                              -------   --------
                                                               77,057    135,858
Less accumulated depreciation and amortization..............   16,068     20,634
                                                              -------   --------
                                                              $60,989   $115,224
                                                              -------   --------
                                                              -------   --------


    Properties with a net book value of $103,527,000 as of December 29, 2002 are
pledged as collateral for certain debt (see Note 10).

DEFERRED COSTS AND OTHER ASSETS

    The following is a summary of the components of deferred costs and other
assets (in thousands):



                                                                  YEAR-END
                                                              -----------------
                                                               2001      2002
                                                               ----      ----
                                                                  
Deferred financing costs....................................  $13,190   $13,190
Co-investment notes receivable from affiliates, net of
  allowance of $569,000 in 2002 (a).........................    2,753     1,778
Long-term portion of note receivable from the Executives
  (Note 23).................................................    1,667     --
Other.......................................................    4,724     6,339
                                                              -------   -------
                                                               22,334    21,307
Less accumulated amortization...............................    2,649     4,703
                                                              -------   -------
                                                              $19,685   $16,604
                                                              -------   -------
                                                              -------   -------


- ---------

 (a) The allowance for non-current doubtful accounts was provided in 2002 (see
     Note 23) and there has been no other activity in the reserve for
     non-current doubtful accounts.

                                                                              65







TRIARC COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
DECEMBER 29, 2002

ACCRUED EXPENSES

    The following is a summary of the components of accrued expenses (in
thousands):



                                                                  YEAR-END
                                                              -----------------
                                                               2001      2002
                                                               ----      ----
                                                                  
Accrued compensation and related benefits...................  $23,736   $25,008
Accrued taxes...............................................   12,229    11,742
Accrued interest............................................    7,732     9,445
Securities sold with an obligation to purchase (Note 5).....   17,384     9,168
Other.......................................................   12,372    18,586
                                                              -------   -------
                                                              $73,453   $73,949
                                                              -------   -------
                                                              -------   -------


OTHER LIABILITIES, DEFERRED INCOME AND MINORITY INTERESTS IN A CONSOLIDATED
SUBSIDIARY

    Other liabilities, deferred income and minority interests in a consolidated
subsidiary includes minority interests of $4,266,000 and $718,000 as of December
30, 2001 and December 29, 2002, respectively, in 280 BT Holdings LLC ('280 BT')
a consolidated subsidiary with a respective 44.1% and 42.6% minority interest
comprised principally of certain of the Company's management (see Note 23).

(7) RESTRICTED CASH EQUIVALENTS

    The following is a summary of the components of non-current restricted cash
equivalents (in thousands):



                                                                  YEAR-END
                                                              -----------------
                                                               2001      2002
                                                               ----      ----
                                                                  
Collateral supporting obligations under insured
  securitization notes (Note 10)............................  $30,567   $30,537
Support for letter of credit securing payments due under a
  lease.....................................................    1,939     1,939
                                                              -------   -------
                                                              $32,506   $32,476
                                                              -------   -------
                                                              -------   -------


66







TRIARC COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
DECEMBER 29, 2002

(8) INVESTMENTS

    The following is a summary of the carrying value of investments classified
as non-current (in thousands):



                                  INVESTMENT
                               -----------------              YEAR-END 2002
                                   YEAR-END        -----------------------------------
                               -----------------                   UNDERLYING   MARKET
                                2001      2002        % OWNED        EQUITY     VALUE
                                ----      ----        -------        ------     -----
                                                                 
Encore Capital Group, Inc.
  common stock, at equity....  $ --      $   681        7.2%         $1,051      $589
EBT Holding Company, LLC, at
  equity.....................      279     --          18.6%          --
                               -------   -------
    Total of all non-current
      Equity Investments.....      279       681
Investments held in deferred
  compensation trusts, at
  cost (Notes 15 and 23).....   22,671    22,671
Encore Capital Group, Inc.
  preferred stock, at cost...    --          873
Non-marketable equity
  securities, at cost........   12,070     4,102
Other, at cost...............    7,054     6,390
                               -------   -------
                               $42,074   $34,717
                               -------   -------
                               -------   -------


    The carrying value of the Company's investment in the common stock of Encore
Capital Group, Inc. ('Encore'), formerly MCM Capital Group, Inc., at
December 29, 2002 is less than its underlying equity interest in Encore
principally due to the Company's recognition of unrealized losses deemed to be
other than temporary during 2000 (see below).

    The Company's consolidated equity in the earnings (losses) of investees
accounted for under the Equity Method and classified as non-current and included
as a component of 'Other income, net' (see Note 17) in the accompanying
consolidated income statements consisted of the following components (in
thousands):



                                                             2000     2001    2002
                                                             ----     ----    ----
                                                                     
Encore Capital Group, Inc., at equity.....................  $(2,099)  $  (7)  $260
Limited partnerships and limited liability companies, at
  equity..................................................     (208)   (214)   --
                                                            -------   -----   ----
                                                            $(2,307)  $(221)  $260
                                                            -------   -----   ----
                                                            -------   -----   ----


    The equity in the earnings (losses) of investees included in 'Other income,
net' in the table above excludes the equity in the earnings or losses of EBT
Holding Company, LLC ('EBT'), an investment limited liability company, which is
included in 'Investment income, net' (see Note 16) in the accompanying
consolidated income statements.

    The Company and certain of its officers have invested in Encore, with the
Company owning 7.2% and the present officers, including entities controlled by
them, collectively owning 17.2% of Encore's issued and outstanding common stock
(see Note 23) as of December 29, 2002. During 2002 the Company, certain of its
officers, including entities controlled by them, and other significant
stockholders of Encore invested in newly issued convertible preferred stock of
Encore (the 'Encore Preferred Stock') in which the Company invested $873,000, or
17.5% of the aggregate $5,000,000 of Encore Preferred Stock, and the officers
invested $1,427,000. The $5,000,000 of Encore Preferred Stock is convertible
into 10,000,000 shares of Encore common stock. If all of the Encore Preferred
Stock were converted, the ownership of the Company and the present officers in
Encore common stock would increase to 13.1% and 23.7%, respectively. Encore is a
financial

                                                                              67







TRIARC COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
DECEMBER 29, 2002

services company specializing in the collection, restructuring, resale and
securitization of receivable portfolios acquired at deep discounts.

    During 2000 the Company's investment in Encore common stock exceeded its
interest in the underlying equity in the net assets of Encore. The Company
recorded amortization of such excess of $107,000 in 2000 which is included in
the equity in losses of Encore. As of December 31, 2000, the Company reduced its
investment in Encore by $2,047,000 to the then fair market value of the Encore
common stock of $.33 per share, or $2.89 per share less than the Company's then
carrying value. The Encore common stock had traded at depressed levels
throughout the second half of 2000 ranging from $.13 to $.88 per share and
Encore had encountered cash flow and liquidity difficulties. As a result, the
Company had deemed the loss on its investment in Encore to be other than
temporary. During 2001, the investment in Encore was reduced to zero due to
losses of Encore which resulted in the Company recording its equity in the
losses of Encore as a reduction of the unrealized gain on a retained interest of
Encore which had been included in accumulated other comprehensive income (see
Note 5).

    During 2002, as disclosed above, the Company invested $873,000 in the Encore
Preferred Stock. In 2002 the Company recognized its cumulative unrecorded equity
in losses of Encore of $744,000 through December 30, 2001 in connection with its
$873,000 investment in Encore Preferred Stock and resumed applying the Equity
Method as a result of the additional investment, recognizing $1,004,000 of
equity in the 2002 earnings of Encore. Accordingly, the net equity in earnings
of Encore amounted to $260,000 during 2002. Also during 2002 the outstanding
principal amount of senior notes of Encore was reduced from $10,000,000 to
$7,250,000 as the lender forgave $2,750,000 of principal and $2,573,000 of
related accrued interest upon the investment in the Encore Preferred Stock. In
connection with this forgiveness, Encore recorded an increase in its additional
paid-in capital of $4,665,000 representing the aggregate $5,323,000 of debt
forgiven less $658,000 of related unamortized debt discount and deferred loan
costs. Accordingly, the Company recorded its equity of $393,000 in such amount
as an increase in 'Additional paid-in capital' during 2002. The effect of the
debt forgiveness was recorded by Encore as a capital contribution since it was
facilitated by the Company and other significant equity holders of Encore
Preferred Stock and through the Company's relationship with the lender resulting
from prior investment banking and financial advisory services rendered to the
Company by the lender and its affiliates.

    The Company and certain of its officers and employees have co-invested in
EBT with the Company owning 18.6% and the officers and employees owning 56.4%
(see Note 23) as of December 29, 2002. EBT had as its only operating asset an
investment in the non-cumulative preferred stock of EBondTrade.com, Inc.
('Ebondtrade'), an online municipal bond trading business. The Company accounted
for its investment in EBT in accordance with the Equity Method; however, EBT's
investment in Ebondtrade was accounted for in accordance with the Cost Method.
Accordingly, the Company had equity in the earnings of EBT of $9,000 and $8,000
in 2000 and 2001, respectively. Ebondtrade encountered operating, cash flow and
liquidity difficulties and in late 2002 its stock became worthless. As a result,
the Company recognized an unrealized loss deemed to be other than temporary for
its then remaining investment in EBT of $279,000 included in 'Investment income,
net' (see Note 16) in the accompanying consolidated statement of income for the
year ended December 29, 2002.

    The Company has an investment in Scientia Health Group Limited ('Scientia')
through its 57.4% (see Note 23) ownership of 280 BT as of December 29, 2002. The
Company consolidates its investment in 280 BT resulting in the investment in
Scientia being included in 'Non-marketable equity securities, at cost' in the
table above, with the related minority interests included in 'Other liabilities,
deferred income and minority interests in a consolidated subsidiary.' 280 BT
invested $5,000,000 in preferred shares of Scientia (the 'Scientia Preferred
Shares') in November 2001, of which $2,500,000 was originally invested by the
Company and $2,475,000 was invested by the Company's management under a
co-investment policy (see Note 23). As of December 29, 2002, the carrying value
of the investment in Scientia was a gross amount of $1,685,000, effectively
reduced by minority interests of $718,000. The gross carrying value represents
the original cost less

68







TRIARC COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
DECEMBER 29, 2002

$3,315,000 of unrealized losses in Scientia that were deemed to be other than
temporary included in 'Other than temporary unrealized losses' in 'Investment
income, net' (see Note 16), effectively reduced by minority interests of
$1,420,000.

SUMMARY UNAUDITED FINANCIAL INFORMATION OF EQUITY INVESTMENTS

    The following is a summary of the carrying value of the Company's aggregate
Equity Investments (in thousands):



                                                                 YEAR-END
                                                              ---------------
                                                               2001     2002
                                                               ----     ----
                                                                 
Current (see Note 5)........................................  $8,797   $1,809
Non-current.................................................     279      681
                                                              ------   ------
                                                              $9,076   $2,490
                                                              ------   ------
                                                              ------   ------


    Presented below is summary unaudited operating information for the Company's
Equity Investments, including those that were included in other short-term
investments, for the year ended December 31, 2000, the year-end of such
investments. Summary unaudited information is not presented as of and for the
years ended December 30, 2001 and December 29, 2002 because the Company's Equity
Investments are no longer significant to the Company's consolidated total assets
or consolidated income (loss) from continuing operations before income taxes and
minority interests in 2001 and 2002. The Company's Equity Investments include
Encore, a financial services company as described above, entities that developed
and operated golf courses and several investment limited partnerships and
limited liability companies, including EBT and 280 KPE Holdings, LLC, which
generally invest in diversified portfolios of securities. As such, the summary
operating information presented below combines revenues and expenses which vary
greatly in nature. Revenues relate to the operations of golf courses as well as
operating revenues of the financial services company. Investment income, net
relates to the investment entities. The summary unaudited operating information
for the year ended December 31, 2000 is as follows (in thousands):

                                                           
Revenues....................................................  $ 49,098
Investment loss, net........................................   (13,121)
Loss before income taxes....................................   (53,491)
Net loss....................................................   (46,234)



(9) GOODWILL AND OTHER INTANGIBLE ASSETS

    The following is a summary of the components of goodwill (in thousands):



                                                                   YEAR-END
                                                              ------------------
                                                               2001       2002
                                                               ----       ----
                                                                  
Goodwill....................................................  $29,599   $102,366
Less accumulated amortization...............................   11,677     11,677
                                                              -------   --------
                                                              $17,922   $ 90,689
                                                              -------   --------
                                                              -------   --------


                                                                              69







TRIARC COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
DECEMBER 29, 2002

    Upon the adoption of SFAS 142 effective December 31, 2001, the Company no
longer amortizes goodwill, which relates entirely to the Company's restaurant
operations. In accordance with the requirements of SFAS 142, the following
summarizes the changes in the carrying amount of goodwill for 2002 (in
thousands):



                                                               2002
                                                               ----
                                                           
Balance at beginning of year................................  $17,922
Goodwill acquired in the Sybra Acquisition (Note 3).........   71,960
Other.......................................................      807
                                                              -------
Balance at end of year......................................  $90,689
                                                              -------
                                                              -------


    A reconciliation of reported income before extraordinary charges, net income
and net income per share adjusted on a pro forma basis for the reversal of
goodwill amortization, net of related income taxes, as though SFAS 142 had been
in effect as of January 3, 2000 is as follows (in thousands except per share
amounts):



                                              2000                                        2001
                            -----------------------------------------   -----------------------------------------
                            AS REPORTED   ADJUSTMENT(a)   AS ADJUSTED   AS REPORTED    ADJUSTMENT     AS ADJUSTED
                            -----------   -------------   -----------   -----------    ----------     -----------
                                                                                    
Income before
  extraordinary charges...   $461,921         $830         $462,751       $52,416         $830          $53,246
Net income................    441,241          830          442,071        52,416          830           53,246
Net income per share:
    Basic.................      18.99          .04            19.03          2.44          .04             2.48
    Diluted...............      18.99          .04            19.03          2.31          .04             2.35


- ---------

(a) This adjustment does not reflect goodwill amortization of $7,973,000, net of
    income taxes, relating to the discontinued beverage operations included in
    the 'Loss from operations' component of 'Total income from discontinued
    operations,' which if adjusted would be fully offset by an equal adjustment
    in the 'Gain on disposal' component of 'Total income from discontinued
    operations' in 2000.

    The following is a summary of the components of other intangible assets, all
of which are subject to amortization (in thousands):



                                          YEAR-END 2001                     YEAR-END 2002
                                  ------------------------------   -------------------------------
                                           ACCUMULATED                       ACCUMULATED
                                   COST    AMORTIZATION    NET      COST     AMORTIZATION    NET
                                   ----    ------------    ---      ----     ------------    ---
                                                                          
Trademarks......................  $8,003      $2,734      $5,269   $ 7,776      $3,056      $4,720
Favorable leases................    --          --          --       3,274        --         3,274
Computer software and
  distribution rights...........     286          83         203       520         223         297
                                  ------      ------      ------   -------      ------      ------
                                  $8,289      $2,817      $5,472   $11,570      $3,279      $8,291
                                  ------      ------      ------   -------      ------      ------
                                  ------      ------      ------   -------      ------      ------


                                                           
Aggregate amortization expense:
    Actual:
      2001..................................................  $655
      2002..................................................   689
Estimate for fiscal year:
      2003..................................................  $909
      2004..................................................   791
      2005..................................................   791
      2006..................................................   791
      2007..................................................   775



70







TRIARC COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
DECEMBER 29, 2002

(10) LONG-TERM DEBT

    Long-term debt consisted of the following (in thousands):



                                                              YEAR-END
                                                         -------------------
                                                           2001       2002
                                                           ----       ----
                                                              
Insured securitization notes bearing interest at 7.44%
  having expected repayments through 2011, net of
  unamortized original issue discount of $30 as of
  December 29, 2002 (a)................................  $273,957   $254,774
Leasehold notes bearing interest at a weighted average
  rate of 9.64% due through 2021 (b)...................     --        82,016
Secured bank term loan bearing interest effectively at
  6.8% due through 2008 (c)............................    21,515     18,287
Secured promissory note bearing interest at 8.95% due
  through 2006 (d).....................................    15,021     13,320
Equipment notes bearing interest at a weighted average
  rate of 9.79% due though 2009 (e)....................     --         6,272
Mortgage notes bearing interest at a weighted average
  rate of 9.37% due through 2018 (f)...................     --         3,346
Mortgage and equipment notes related to restaurants
  sold in 1997 bearing interest at a weighted average
  rate of 10.37% as of December 29, 2002 due through
  2016 (g).............................................     3,230      3,024
Capitalized lease obligations..........................     --         5,648
Other..................................................     --           435
                                                         --------   --------
        Total debt.....................................   313,723    387,122
        Less amounts payable within one year...........    24,768     34,422
                                                         --------   --------
                                                         $288,955   $352,700
                                                         --------   --------
                                                         --------   --------


    Aggregate annual maturities of long-term debt were as follows as of
December 29, 2002 (in thousands):



FISCAL YEAR                                                  AMOUNT
- -----------                                                  ------
                                                         
2003......................................................  $ 34,422
2004......................................................    36,080
2005......................................................    38,158
2006......................................................    44,872
2007......................................................    39,751
Thereafter................................................   193,869
                                                            --------
                                                             387,152
Less unamortized original issue discount..................        30
                                                            --------
                                                            $387,122
                                                            --------
                                                            --------


- ---------

 (a) The Company, through Arby's Trust, issued insured non-recourse
     securitization notes (the 'Securitization Notes') in the principal amount
     of $290,000,000, with a discounted amount of $289,963,000, on November 21,
     2000. In connection with the issuance of the Securitization Notes, the
     Company incurred $12,982,000 ($12,445,000 estimated as of December 31,
     2000) of fees and expenses which are included, net of amortization, in
     'Deferred costs and other assets' in the accompanying consolidated balance
     sheets (see Note 6).

                                              (footnotes continued on next page)

                                                                              71







TRIARC COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
DECEMBER 29, 2002

(footnotes continued from previous page)

     The remaining principal amount of the Securitization Notes of $254,804,000
     as of December 29, 2002 is due no later than December 2020. However, based
     on current projections and assuming the adequacy of available funds, as
     defined under the indenture (the 'Indenture') pursuant to which the
     Securitization Notes were issued, the Company currently estimates it will
     repay $20,665,000 in 2003 with increasing annual payments to $37,377,000 in
     2011 in accordance with a targeted principal payment schedule. The table of
     annual maturities of long-term debt above reflects these targeted payments.
     The Securitization Notes are redeemable by Arby's Trust at an amount equal
     to the total of remaining principal, accrued interest and the excess, if
     any, of the discounted value of the remaining principal and interest
     payments over the outstanding principal amount of the Securitization Notes.

     Obligations under the Securitization Notes are insured by a financial
     guarantee company and are collateralized by assets with an aggregate net
     book value of $46,035,000 as of December 29, 2002 consisting of cash and
     cash equivalents of $9,201,000, a cash equivalent reserve account of
     $30,537,000 and royalty receivables of $6,297,000.

 (b) The leasehold notes (the 'Leasehold Notes') with a remaining principal of
     $82,016,000 were assumed in the Sybra Acquisition and are due in equal
     monthly installments including interest through 2021 of which $5,937,000 is
     due in 2003. The Leasehold Notes bear interest at rates ranging from 6.23%
     to 10.89% and are secured by restaurant leasehold improvements, equipment
     and inventories with respective net book values of $32,049,000, $12,783,000
     and $2,114,000.

 (c) The Company maintains a secured bank term loan (the 'Bank Term Loan') with
     a remaining principal amount of $18,287,000 as of December 29, 2002 with
     payments due of $3,227,000 in each year through 2007 and $2,152,000 in
     2008. The Bank Term Loan bears interest at variable rates (3.23% as of
     December 29, 2002), determined at the Company's option, at the prime rate
     or the one-month London Interbank Offered Rate ('LIBOR') plus 1.85%, reset
     monthly. The Company also entered into an interest rate swap agreement (the
     'Swap Agreement') on the Bank Term Loan which commenced August 1, 2001
     whereby it effectively pays a fixed rate of 6.8% as long as the one-month
     LIBOR is less than 6.5%, but with an embedded written call option whereby
     the Swap Agreement will no longer be in effect if, and for as long as, the
     one-month LIBOR is at or above 6.5% (see Note 11). Obligations under the
     Bank Term Loan are secured by an airplane with a net book value of
     $21,810,000 as of December 29, 2002.

 (d) The Company assumed an $18,000,000 secured promissory note (the 'Promissory
     Note') in connection with its acquisition of 280 Holdings, LLC (see
     Note 23) on January 19, 2000. The remaining principal amount of the
     Promissory Note of $13,320,000 as of December 29, 2002 is due $1,860,000 in
     2003 with increasing annual payments to $7,204,000 in 2006. The Promissory
     Note is secured by an airplane with a net book value of $27,631,000 as of
     December 29, 2002.

 (e) The equipment notes (the 'Equipment Notes') with a remaining principal of
     $6,272,000 were assumed in the Sybra Acquisition and are due in equal
     monthly installments including interest through 2009 of which $1,281,000 is
     due in 2003. The Equipment Notes bear interest at rates ranging from 8.52%
     to 11.64% and are secured by restaurant equipment with a net book value of
     $7,070,000.

 (f) The mortgage notes (the 'Mortgage Notes') with a remaining principal of
     $3,346,000 were assumed in the Sybra Acquisition and are due in equal
     monthly installments including interest through 2018 of which $79,000 is
     due in 2003. The Mortgage Notes bear interest at rates ranging from 8.77%
     to 10.11% and are secured by land and buildings of restaurants with net
     book values of $1,110,000 and $1,074,000, respectively.

 (g) The Company remains liable for $3,024,000 of mortgage and equipment notes
     payable as of December 29, 2002, of which it is a co-obligor for notes
     aggregating $446,000 as of December 29, 2002.

72







TRIARC COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
DECEMBER 29, 2002

    The loan agreements for most of the Leasehold Notes, Mortgage Notes and
Equipment Notes contain various prepayment provisions that provide for
prepayment penalties of up to 5% of the principal amount prepaid or are based
upon specified 'yield maintenance' formulas.

    The Indenture and the agreements for the Leasehold Notes and Mortgage Notes
contain various covenants, the most restrictive of which (1) require periodic
financial reporting, (2) require meeting certain debt service coverage ratio
tests and (3) restrict, among other matters, (a) the incurrence of indebtedness,
(b) certain asset dispositions and (c) the payment of distributions by Arby's
Trust and Sybra. The Company was in compliance with all of such covenants as of
December 29, 2002.

    As of December 29, 2002, Arby's Trust had no amounts available for the
payment of distributions. However, on January 21, 2003, $1,650,000 relating to
cash flows for the calendar month of December 2002 became available for the
payment of such distributions by Arby's Trust, through its parent to Arby's
which, in turn, would be available to Arby's to pay management service fees or
Federal income tax-sharing payables to Triarc or, to the extent of any excess,
make distributions to Triarc. In connection with Sybra's reorganization, Sybra
is unable to pay any distributions prior to December 27, 2004.

    Sybra is required to maintain a fixed charge coverage charge ratio (the
'FCCR') under the agreements for the Leasehold Notes and Equipment Notes. In the
event that Sybra fails to maintain the minimum FCCR, such failure may be cured
by a capital contribution in cash to Sybra in the quarter immediately following
such period of an amount such that the minimum FCCR would have been met.

(11) DERIVATIVE INSTRUMENTS

    The Company's derivative instruments, excluding those that may be settled in
its own stock and, accordingly, not affected by SFAS No. 133, 'Accounting for
Derivative Instruments and Hedging Activities,' during 2001 and 2002 are
(1) the conversion component of short-term investments in convertible debt
securities which are accounted for as trading securities and had aggregate
carrying values of $2,665,000 and $601,000 as of December 30, 2001 and
December 29, 2002, respectively, (2) put and call options on equity and
corporate debt securities which are accounted for as trading securities and
(3) the Swap Agreement entered into during 2001 (see Note 10 and below). The
Company enters into convertible debt and put and call derivatives as part of its
overall investment portfolio strategy. This strategy includes balancing the
relative proportion of its investments in cash equivalents with their relative
stability and risk-minimized returns with opportunities to avail the Company of
higher, but more risk-inherent, returns associated with other investments,
including convertible debt securities and put and call options. The Swap
Agreement effectively establishes a fixed interest rate on the variable-rate
Bank Term Loan, but with an embedded written call option whereby the Swap
Agreement will no longer be in effect if, and for as long as, the one-month
LIBOR is at or above a specified rate. On the initial date of the Swap
Agreement, the fair market value of the Swap Agreement and the embedded written
call option netted to zero but, as interest rates either increase or decrease,
the fair market values of the Swap Agreement and written call option have moved
and will continue to move in the same direction but not necessarily by the same
amount. As of December 30, 2001 and December 29, 2002, the net fair market value
of the Swap Agreement and embedded written call option had changed to payable
positions of $651,000 and $1,229,000, respectively, included in 'Other
liabilities, deferred income and minority interests in a consolidated
subsidiary' in the accompanying consolidated balance sheets, resulting in
charges of $651,000 and $578,000 included in 'Interest expense' in the
accompanying consolidated income statements for 2001 and 2002, respectively.

                                                                              73







TRIARC COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
DECEMBER 29, 2002

(12) FAIR VALUE OF FINANCIAL INSTRUMENTS

    The carrying amounts and estimated fair values of the Company's financial
instruments for which the disclosure of fair values is required were as follows
(in thousands):



                                                            YEAR-END
                                            -----------------------------------------
                                                   2001                  2002
                                            -------------------   -------------------
                                            CARRYING     FAIR     CARRYING     FAIR
                                             AMOUNT     VALUE      AMOUNT     VALUE
                                             ------     -----      ------     -----
                                                                 
Financial assets:
    Cash and cash equivalents (a).........  $506,461   $506,461   $457,472   $457,472
    Short-term investments excluding
      Equity Investments (Note 5) (b).....   144,604    152,876    173,352    182,586
    Restricted cash equivalents (Note 7) (a)  32,506     32,506     32,476     32,476
    Non-current Cost Investments (Note 8)
      for which it is:
      Practicable to estimate fair value (c)  29,725     34,769     29,934     38,412
      Not practicable (d).................    12,070      --         4,102      --
Financial liabilities:
    Long-term debt, including current
      portion (Note 10):
      Securitization Notes (e)............   273,957    289,052    254,774    287,102
      Leasehold Notes (f).................     --         --        82,016     82,016
      Bank Term Loan (g)..................    21,515     21,515     18,287     18,287
      Promissory Note (e).................    15,021     15,962     13,320     14,745
      Equipment Notes (f).................     --         --         6,272      6,272
      Mortgage Notes (f)..................     --         --         3,346      3,346
      Mortgage and equipment notes related
        to restaurants sold in 1997 (e)...     3,230      3,518      3,024      3,514
      Capitalized lease obligations (f)...     --         --         5,648      5,648
      Other (f)...........................     --         --           435        435
                                            --------   --------   --------   --------
        Total long-term debt..............   313,723    330,047    387,122    421,365
                                            --------   --------   --------   --------
    Securities sold with an obligation to
      purchase (Note 5) (b)...............    17,384     17,384      9,168      9,168
    Deferred compensation payable to
      related parties (Note 23) (h).......    24,356     24,356     25,706     25,706
    Swap Agreement (Note 11) (i)..........       651        651      1,229      1,229
    Written call option on Triarc's common
      stock (Note 14) (j).................        30         30      --         --
Guarantees of obligations of (Note 22):
    Subsidiaries of RTM Restaurant
      Group, Inc.:
      Lease obligations (k)...............       293        293        194        194
      Mortgage and equipment notes
        payable (k).......................       194        194        137        137
    AmeriGas Eagle Propane, L.P. debt (l).        --        690      --           690
    Encore:
      Revolving credit borrowings (m).....        --         70      --            18
      Senior notes payable (k)............       505        505        338        338


                                                        (footnotes on next page)

74







TRIARC COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
DECEMBER 29, 2002

(footnotes from previous page)

 (a) The carrying amounts approximated fair value due to the short-term
     maturities of the cash equivalents.

 (b) The fair values were based on quoted market prices or statements of account
     received from investment managers or investees which are principally based
     on quoted market or brokered/dealer prices.

 (c) These consist of investments held in deferred compensation trusts and
     certain other non-current Cost Investments. The fair values of these
     investments were based almost entirely on statements of account received
     from investment managers or investees which are principally based on quoted
     market or brokered/dealer prices. To the extent that some of these
     investments, including the underlying investments in investment limited
     partnerships, do not have available quoted market or brokered/dealer
     prices, we rely on third-party appraisals or valuations performed by the
     investment managers or investees in valuing those securities.

 (d) It was not practicable to estimate the fair value of these Cost Investments
     because the investments are non-marketable and are in start-up enterprises.

 (e) The fair values were determined by discounting the future scheduled
     payments using an interest rate assuming the same original issuance spread
     over a current Treasury bond yield for securities with similar durations.

 (f) The fair values were based on an independent appraisal as part of the Sybra
     Acquisition purchase accounting as of December 27, 2002.

 (g) The fair value approximated the carrying value due to the frequent reset,
     on a monthly basis, of the floating interest rate.

 (h) The fair value was equal to the carrying amount of the underlying
     investments held by the Company in the related trusts which may be used to
     satisfy such payable in full.

 (i) The fair value was based on a quote provided by the bank counterparty.

 (j) The fair value was determined by independent third-party consultants using
     the Black-Scholes option pricing model, although, in the opinion of the
     Company, the model has limitations on its effectiveness and does not
     necessarily provide a reliable single measure of the fair value of the
     written call option.

 (k) The fair values were assumed to reasonably approximate their carrying
     amounts since the carrying amounts represent the fair value as of the
     inception of the guarantee less subsequent amortization.

 (l) The fair value was determined through an independent third-party appraisal
     based on the net present value of the probability adjusted payments which
     may be required to be made by the Company.

 (m) The fair value was determined through an independent third-party appraisal
     based on the net present value of the estimated interest payment
     differential between the Encore revolving credit borrowings with and
     without the related guarantee.

    The carrying amounts of accounts receivable, accounts payable and accrued
expenses approximated fair value due to the related allowance for doubtful
accounts receivable and the short-term maturities of accounts payable and
accrued expenses and, accordingly, they are not required to be presented in the
table above.

(13) INCOME TAXES

    Income (loss) from continuing operations before income taxes and minority
interests consisted of the following components (in thousands):



                                                        2000      2001       2002
                                                        ----      ----       ----
                                                                  
Domestic.............................................  $ 2,334   $17,420   $(16,606)
Foreign..............................................     (123)      (10)       (28)
                                                       -------   -------   --------
                                                       $ 2,211   $17,410   $(16,634)
                                                       -------   -------   --------
                                                       -------   -------   --------


                                                                              75







TRIARC COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
DECEMBER 29, 2002

    The provision for (benefit from) income taxes from continuing operations
consisted of the following components (in thousands):



                                                        2000      2001      2002
                                                        ----      ----      ----
                                                                  
Current:
    Federal..........................................  $(1,164)  $ 7,341   $(3,855)
    State............................................    3,465     2,140     1,668
    Foreign..........................................      322       269       256
                                                       -------   -------   -------
                                                         2,623     9,750    (1,931)
                                                       -------   -------   -------
Deferred:
    Federal..........................................   10,377      (569)   (1,226)
    State............................................     (632)     (485)     (172)
                                                       -------   -------   -------
                                                         9,745    (1,054)   (1,398)
                                                       -------   -------   -------
        Total........................................  $12,368   $ 8,696   $(3,329)
                                                       -------   -------   -------
                                                       -------   -------   -------


    The net current deferred income tax benefit and the net non-current deferred
income tax (liability) resulted from the following components (in thousands):



                                                                   YEAR-END
                                                              -------------------
                                                                2001       2002
                                                                ----       ----
                                                                   
Current deferred income tax benefit (liability):
    Accrued compensation and related benefits...............  $  7,574   $  5,851
    Investment limited partnerships basis differences.......      (713)     3,692
    Investment write-downs for unrealized losses deemed
      other than temporary on marketable securities.........     1,095      3,142
    Accrued liabilities of SEPSCO discontinued operations
      (Note 18).............................................     1,095      1,050
    Severance, relocation and closed facilities reserves....       203      1,005
    Unrealized (gains) losses, net, on available-for-sale
      and trading securities and securities sold with an
      obligation to purchase (Note 5).......................      (439)       692
    Allowance for doubtful accounts.........................       587        490
    Other, net..............................................     2,093         12
                                                              --------   --------
                                                                11,495     15,934
                                                              --------   --------
Non-current deferred income tax benefit (liability):
    Gain on sale of propane business........................   (37,003)   (37,003)
    Reserve for contingencies and other tax matters, net....   (15,148)   (15,148)
    Investment in propane business other basis
      differences...........................................   (11,286)    (8,936)
    Accelerated depreciation and other property basis
      differences...........................................    (6,834)    (8,888)
    Intangible assets basis differences.....................        --      4,495
    Investment write-downs for unrealized losses deemed
      other than temporary on non-current investments.......       734      2,368
    Other, net..............................................       (69)     2,145
                                                              --------   --------
                                                               (69,606)   (60,967)
                                                              --------   --------
                                                              $(58,111)  $(45,033)
                                                              --------   --------
                                                              --------   --------


    The decrease in the net deferred income tax liability from $58,111,000 at
December 30, 2001 to $45,033,000 at December 29, 2002, or a decrease of
$13,078,000, exceeds the 2002 benefit for deferred

76







TRIARC COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
DECEMBER 29, 2002

income taxes of $1,398,000. The difference of $11,680,000 is principally due to
the recognition of net deferred tax assets in connection with the Sybra
Acquisition.

    A reconciliation of the difference between the reported provision for
(benefit from) income taxes and the provision (benefit) that would result from
applying the 35% Federal statutory rate to the income or loss from continuing
operations before income taxes and minority interests is as follows (in
thousands):



                                                        2000      2001      2002
                                                        ----      ----      ----
                                                                  
Income tax provision (benefit) computed at Federal
  statutory rate.....................................  $   774   $ 6,094   $(5,822)
Increase (decrease) in Federal income taxes resulting
  from:
    Minority interests in loss of a consolidated
      subsidiary.....................................    --           88     1,242
    Non-deductible compensation......................    9,702     1,131       782
    State income taxes, net of Federal income tax
      benefit........................................    1,841     1,076       972
    Amortization of non-deductible goodwill..........      284       284     --
    Dividend income exclusion........................     (350)     (271)     (567)
    Other, net.......................................      117       294        64
                                                       -------   -------   -------
                                                       $12,368   $ 8,696   $(3,329)
                                                       -------   -------   -------
                                                       -------   -------   -------


    The Company's Federal income tax returns for years subsequent to 1993 have
not been examined by the IRS. However, should any income taxes or interest be
assessed as the result of any Federal or state examinations for periods through
the October 25, 2000 date of the Snapple Beverage Sale, Cadbury has agreed to
pay up to $4,984,000 of any resulting income taxes or associated interest
relating to the operations of Snapple Beverage Group and Royal Crown.

(14) STOCKHOLDERS' EQUITY

Class A Common Stock

    The Company's class A common stock (the 'Class A Common Stock') has one vote
per share. There were no changes in the 100,000,000 shares authorized and the
29,550,663 shares issued of Class A Common Stock throughout 2000, 2001 and 2002.

Class B Common Stock

    In October 2001, the Company authorized 100,000,000 shares of a new class B
common stock (the 'Class B Common Stock'), none of which have been issued
through December 29, 2002, and eliminated and effectively canceled the
previously authorized 25,000,000 shares of its former non-voting class B common
stock (the 'Former Class B Common Stock'). The voting rights of the Class B
Common Stock will not be determined until an issuance thereof. All outstanding
shares of the Former Class B Common Stock, which were held by affiliates of
Victor Posner (the 'Posner Entities'), had been repurchased by the Company, as
disclosed in more detail below under 'Treasury Stock.' Victor Posner was a
former Chairman and Chief Executive Officer of Triarc prior to May 1993. As a
result of the effective cancellation of the 5,997,622 shares of the Former Class
B Common Stock, the Company recorded an entry in 2001 within stockholders'
equity which reduced 'Common stock' by $600,000, 'Additional paid-in capital' by
$83,211,000, 'Retained earnings' by $43,325,000 and 'Common stock held in
treasury' by $127,136,000.

Preferred Stock

    The Company increased the number of authorized preferred shares to
100,000,000 in October 2001 from 25,000,000, none of which were issued
throughout 2000, 2001 and 2002. The authorized preferred stock

                                                                              77








TRIARC COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
DECEMBER 29, 2002

previously included 5,982,866 shares designated as redeemable preferred stock
until such shares were retired on August 20, 2001. As a result, all of the
authorized 100,000,000 shares of preferred stock are undesignated.

Treasury Stock

    A summary of the changes in the number of shares of Class A Common Stock and
Former Class B Common Stock held in treasury is as follows (in thousands):



                                                  2000                2001           2002
                                            -----------------   -----------------   -------
                                                      FORMER              FORMER
                                            CLASS A   CLASS B   CLASS A   CLASS B   CLASS A
                                            -------   -------   -------   -------   -------
                                                                     
Number of shares at beginning of year.....   9,773     1,999     9,224     3,998     9,194
Common shares acquired from Posner
  Entities (a)............................      --     1,999      --       1,999      --
Common shares acquired in open market
  transactions............................      --      --         300      --         289
Common shares acquired from certain
  officers and a director of the Company (b) 1,046      --        --        --        --
Common shares retired (c).................    --        --        --      (5,997)     --
Common shares issued from treasury upon
  exercises of stock options..............  (1,585)     --        (323)     --        (311)
Common shares issued from treasury for
  directors' fees.........................      (9)     --          (7)     --          (6)
Other.....................................      (1)     --        --        --        --
                                            ------     -----     -----    ------     -----
Number of shares at end of year...........   9,224     3,998     9,194      --       9,166
                                            ------     -----     -----    ------     -----
                                            ------     -----     -----    ------     -----


- ---------

 (a) In August 1999 Triarc entered into a contract to repurchase in three
     separate transactions the 5,997,622 shares of the Former Class B Common
     Stock then held by the Posner Entities for an aggregate of $127,050,000.
     Triarc completed the purchases of 1,999,207 shares of Former Class B Common
     Stock (the 'Class B Repurchases') each on August 19, 1999, August 10, 2000
     and August 10, 2001. The August 10, 2000 and August 10, 2001 Class B
     Repurchases were for an aggregate of $42,343,000 and $43,843,000,
     respectively, at negotiated prices of $21.18 and $21.93 per share,
     respectively, plus expenses of $30,000 for the August 10, 2000 repurchase.
     The negotiated prices were based on the fair market value of the Class A
     Common Stock of $20.44 per share at the time the transaction was
     negotiated. The August 10, 2001 payment resulted in the reduction to zero
     of the 'Common stock to be acquired' component of 'Stockholders' equity.'

 (b) During December 2000 the Company repurchased 1,045,834 shares of its Class
     A Common Stock from certain of its officers and a director for an aggregate
     cost of $25,942,000 (see disclosure below).

 (c) On October 25, 2001, all of the previously authorized 25,000,000 shares of
     the Former Class B Common Stock were eliminated and effectively canceled
     (see disclosure above), which effectively retired all 5,997,622 shares of
     the Former Class B Common Stock then held in treasury.

Written Call Option

    Prior to February 8, 2003, Cadbury had the right to cause the Company to
issue Class A Common Shares upon conversion of the Debentures assumed by
Cadbury, which effectively established a written call option on such stock (the
'Written Call Option'). Cadbury called the Debentures for redemption in full
with a redemption date of February 9, 2003 and the Written Call Option
terminated without any Class A Common Stock being called under the option. The
original fair value of the Written Call Option of $1,476,000 as of October 25,
2000 was recorded as a reduction of the 'Gain on disposal' component of
'Total income from

78







TRIARC COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
DECEMBER 29, 2002

discontinued operations' in the accompanying consolidated income statement for
the year ended December 31, 2000 (see Note 18). The fair value of the Written
Call Option, of $30,000 as of December 30, 2001 and less than $1,000 as of
December 29, 2002, was reported as a liability included in 'Other liabilities,
deferred income and minority interests in a consolidated subsidiary' in the
accompanying consolidated balance sheets. The reduction in the fair value of
the Written Call Option of $653,000 from October 25, 2000 to December 31, 2000,
$793,000 during 2001 and $30,000 during 2002 was reported as a component of
'Other income, net' (see Note 17). The fair value of the Written Call Option
was determined by independent third-party consultants using the Black-Scholes
option pricing model.

Stock-Based Compensation

    The Company maintains or maintained several equity plans (the 'Equity
Plans') which collectively provide or provided for the grant of stock options to
certain officers, key employees, consultants and non-employee directors and
shares of Class A Common Stock pursuant to automatic grants in lieu of annual
retainer or meeting attendance fees to non-employee directors. The Equity Plans
include the 2002 Equity Participation Plan which was approved by the Company's
stockholders in June 2002 and which authorized an additional 5,000,000 shares
for grants of stock options, tandem stock appreciation rights and restricted
shares of the Company's common stock. As of December 29, 2002, there are
5,398,442 shares available for future grants under the Equity Plans.

    A summary of changes in outstanding stock options under the Equity Plans is
as follows:



                                                                                WEIGHTED AVERAGE
                                              OPTIONS         OPTION PRICE        OPTION PRICE
                                              -------         ------------        ------------
                                                                       
    Outstanding at January 2, 2000.........  10,611,565        $6.39-$30.00          $17.78
    Granted during 2000 (a)................   1,018,000      $19.00-$25.4375         $25.17
    Exercised during 2000..................  (1,584,545)      $6.39-$23.3125         $14.31
    Stock options settled for cash or on a
      net share basis (b)..................    (868,755)     $10.125-$23.6875        $16.60
    Terminated during 2000.................    (257,847)      $10.125-$27.00         $19.55
                                             ----------
    Outstanding at December 31, 2000.......   8,918,418       $10.125-$30.00         $19.31
    Granted during 2001 (a)................     912,500       $24.60-$26.15          $24.69
    Exercised during 2001..................    (323,334)     $10.125-$24.125         $17.56
    Stock options surrendered by the
      Executives (see Note 23).............    (775,000)         $20.125             $20.13
    Terminated during 2001.................    (143,000)     $16.875-$26.4375        $23.35
                                             ----------
    Outstanding at December 30, 2001.......   8,589,584       $10.125-$30.00         $19.81
    Granted during 2002 (a)................   1,031,000       $26.93-$27.17          $26.94
    Exercised during 2002..................    (311,496)     $10.125-$25.4375        $19.67
    Terminated during 2002.................     (47,667)     $17.75-$25.4375         $24.39
                                             ----------
    Outstanding at December 29, 2002.......   9,261,421       $10.125-$30.00         $20.58
                                             ----------
                                             ----------


- ---------

 (a) The weighted average grant date fair values of stock options granted under
     the Equity Plans during 2000, 2001 and 2002, all of which were granted at
     exercise prices equal to the market price of the stock on the grant date,
     were $11.37, $8.12 and $8.22, respectively.

 (b) Includes 856,169 stock options held by the employees of Snapple Beverage
     Group and Royal Crown who chose to surrender these options prior to the
     Snapple Beverage Sale (see discussion below).

                                                                              79







TRIARC COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
DECEMBER 29, 2002

    A summary of exercisable stock options under the Equity Plans is as follows:



                                                                                WEIGHTED AVERAGE
                                                 OPTIONS       OPTION PRICE       OPTION PRICE
                                                 -------       ------------       ------------
                                                                          
    December 31, 2000.........................  3,468,671     $10.125-$30.00        $17.16
    December 30, 2001.........................  3,921,423     $10.125-$30.00        $17.79
    December 29, 2002.........................  4,643,922     $10.125-$30.00        $18.64


    The following table sets forth information relating to stock options
outstanding and stock options exercisable at December 29, 2002 under the Equity
Plans:



                        STOCK OPTIONS OUTSTANDING                               STOCK OPTIONS EXERCISABLE
- --------------------------------------------------------------------------   -------------------------------
                            OUTSTANDING AT      WEIGHTED       WEIGHTED      OUTSTANDING AT      WEIGHTED
                               YEAR-END      AVERAGE YEARS      AVERAGE         YEAR-END          AVERAGE
       OPTION PRICE              2002          REMAINING     OPTION PRICE         2002         OPTION PRICE
       ------------              ----          ---------     ------------         ----         ------------
                                                                                
$10.125 - $13.375.........    1,050,835           2.9           $11.19          1,050,835         $11.19
$16.25 - $17.75...........      784,003           6.7           $17.52            784,003         $17.52
$18.00 - $19.75...........    1,093,500           0.6           $18.11          1,088,500         $18.11
$20.125...................    2,725,000           1.3           $20.13              --              --
$20.375 - $24.75..........    1,593,500           6.7           $23.59          1,056,831         $23.08
$25.00 - $30.00...........    2,014,583           8.9           $26.25            663,753         $25.58
                              ---------                                         ---------
                              9,261,421           4.5                           4,643,922
                              ---------                                         ---------
                              ---------                                         ---------


    Stock options under the Equity Plans generally have maximum terms of ten
years and vest ratably over periods of generally three years but not exceeding
five years from date of grant. However, an aggregate 2,725,000 stock options
outstanding at December 29, 2002 granted on April 21, 1994 to the Executives at
an exercise price of $20.125 per option vest on October 21, 2003.

    Stock options under the Equity Plans are generally granted at the fair
market value of the Class A Common Stock at the date of grant. However, options
granted in March 1997 included 1,331,000 options issued at a weighted average
option price of $12.70 which was below the $14.82 weighted average fair market
value of the Class A Common Stock on the respective dates of grant (based on the
closing price on such dates), resulting in aggregate unearned compensation,
representing the initial intrinsic value, of $2,823,000 originally reported in
the 'Unearned compensation' component of stockholders' equity. Such unearned
compensation was amortized as compensation expense over the applicable vesting
period of one to three years through March 2000. During 2000, $61,000 of
remaining unearned compensation was credited to 'Unearned compensation,' of
which $49,000 relating to employees of Triarc and Arby's was charged to 'General
and administrative' and $12,000 relating to employees of Snapple Beverage Group
and Royal Crown was reported in the 'Loss from operations' component of 'Total
income from discontinued operations.'

    During December 2000, certain of the Company's officers and a director
exercised stock options under the Equity Plans and the Company repurchased the
1,045,834 shares of its Class A Common Stock received by these individuals upon
such exercises on the respective exercise dates. Since such shares of Class A
Common Stock were repurchased within six months after exercise of the related
stock options, the Company recognized aggregate compensation cost of $10,422,000
representing the excess of the market prices on the dates of purchase by the
Company over the exercise prices of the underlying stock options, net of any
amortization related to such stock options issued below market. Such amount was
charged to 'General and administrative' with an offsetting credit to 'Additional
paid-in capital.'

    As disclosed in Note (b) above, during October 2000 certain employees of
Snapple Beverage Group and Royal Crown who held stock options for Triarc's Class
A Common Stock surrendered 856,169 stock options prior to the Snapple Beverage
Sale. Such option holders received an amount initially equal to the excess of
$23.75 per option over the respective exercise prices of the underlying stock
option, or an aggregate

80







TRIARC COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
DECEMBER 29, 2002

$6,159,000 of cash, in this settlement. Such cash payment, net of $274,000
previously amortized for stock options issued below market, or $5,885,000, was
recorded in the 'Gain on disposal' component of 'Total income from discontinued
operations' in the accompanying consolidated income statement for the year ended
December 31, 2000. Further, Triarc agreed to pay cash compensation to certain of
these individuals for each option surrendered equal to the excess of the average
of the five highest daily closing prices of Triarc's Class A Common Stock during
the 90-day period following the October 25, 2000 date of the Snapple Beverage
Sale over the $23.75 price used in the settlement, which aggregated $599,000 and
was paid in January 2001. Since each of the five highest daily closing prices
occurred during 2000, the Company recorded the liability for the full $599,000
in 2000 with an equal offsetting charge to 'General and administrative'
expenses.

    During 2000, 2001 and 2002, there were certain other modifications to the
vesting or exercise periods of stock options relating to certain terminated
employees of the Company. Such modifications resulted in aggregate compensation
of $491,000, $462,000 and $275,000 during 2000, 2001 and 2002, respectively,
which was credited to 'Additional paid-in-capital' and was charged to 'General
and administrative', except for $26,000 during 2000 relating to employees of
Snapple Beverage Group and Royal Crown which was reported in the 'Loss from
operations' component of 'Total income from discontinued operations.'

    Snapple Beverage Group maintained a stock option plan (the 'Snapple Beverage
Plan') which provided for the grant of options to purchase shares of Snapple
Beverage Group's common stock (the 'Snapple Beverage Common Stock') to key
employees, officers, directors and consultants of Snapple Beverage Group and the
Company. Effective with the Snapple Beverage Sale on October 25, 2000, the
Company was no longer responsible for the 149,284 then outstanding stock options
under the Snapple Beverage Plan which remained the responsibility of Snapple
Beverage Group under Cadbury's ownership and which at the time of the Snapple
Beverage Sale had an aggregate intrinsic value of $123,638,000. A summary of
changes in outstanding stock options under the Snapple Beverage Plan is as
follows:



                                                                        WEIGHTED AVERAGE
                                        OPTIONS       OPTION PRICE        OPTION PRICE
                                        -------       ------------        ------------
                                                               
Outstanding at January 2, 2000 (a)....   147,450     $107.05-$311.99        $128.55
Granted during 2000...................     2,501         $456.14            $456.14
Terminated during 2000................      (667)    $138.83-$311.99        $182.18
Stock options no longer the
  responsibility of the Company (see
  disclosure above)...................  (149,284)    $107.05-$456.14        $133.80
                                        --------
Outstanding and exercisable at
  December 31, 2000, December 30, 2001
  and December 29, 2002...............     --
                                        --------
                                        --------


- ---------

 (a) Exercisable stock options as of January 2, 2000 were 47,723 stock options
     at prices of $107.05 and $138.83 with a weighted average option price of
     $123.07.

    Stock options under the Snapple Beverage Plan were generally granted at the
fair value of Snapple Beverage Common Stock at the date of grant as determined
by independent appraisals. However, all 2,501 options granted in 2000 were
issued at option prices below the fair market value of Snapple Beverage Common
Stock on the date of grant resulting in aggregate compensation expense of
$1,157,000, of which $412,000 relating to an employee of Triarc was included in
'General and administrative' and $745,000 relating to employees of Snapple
Beverage Group was reported in the 'Loss from operations' component of 'Total
income from discontinued operations.' The weighted average grant date fair value
of the options granted during 2000 was $462.53. Stock options under the Snapple
Beverage Plan had maximum terms of ten years and generally vested or would have
vested ratably over periods approximating three years. However, 144,675 stock
options reissued in 1999 vested or would have vested ratably on July 1 of 2000,
2001 and 2002.

                                                                              81







TRIARC COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
DECEMBER 29, 2002

    The Snapple Beverage Plan provided for an equitable adjustment of options in
the event of a recapitalization or similar event. Effective as of May 17, 1999
the exercise prices of the Snapple Beverage Group options then outstanding that
were granted prior to January 4, 1999 were equitably adjusted for the effects of
net distributions of $91,342,000, principally consisting of transfers of cash
and deferred tax assets from Snapple Beverage Group to Triarc, partially offset
by the effect of the contribution of Stewart's to Snapple Beverage Group
effective May 17, 1999. The exercise prices of options granted at $147.30 per
share were equitably adjusted to $107.05 per share and options granted at
$191.00 per share were equitably adjusted to $138.83 per share and a cash
payment (the 'Cash Payment') of $51.34 and $39.40 per share, respectively, was
due from the Company to the option holder following the exercise of the stock
options and the occurrence of certain other events. The Company accounted for
the equitable adjustment of the Snapple Beverage Group stock options in
accordance with the intrinsic value method. In accordance therewith, the
equitable adjustment, exclusive of the Cash Payment, was considered a
modification to the terms of existing stock options. Compensation expense for
the Cash Payment was recognized ratably over the vesting period of the stock
options through the date such options were no longer the responsibility of the
Company but remained the responsibility of Snapple Beverage Group under
Cadbury's ownership in connection with the Snapple Beverage Sale. Such
compensation expense with respect to option holders who were employees of Triarc
of $306,000 during 2000 is included in 'General and administrative' in the
accompanying consolidated income statement. Such compensation expense with
respect to option holders who were employees of Snapple Beverage Group of
$312,000, net of income taxes of $199,000, during 2000 was charged to the 'Loss
from operations' component of 'Total income from discontinued operations.' Upon
the release of the Company's obligation for such Cash Payment to option holders
who were employees of Triarc, the related accruals of $1,550,000, net of income
taxes of $883,000, were released and reported in the 'Gain on disposal'
component of 'Total income from discontinued operations' (see Note 18). No
compensation expense was recognized for the changes in the exercise prices of
the outstanding options because such modifications to the options did not create
a new measurement date under accounting principles generally accepted in the
United States of America.

    As disclosed in Note 1, the Company accounts for stock options in accordance
with the intrinsic value method and, accordingly, has not recognized any
compensation expense for those stock options granted at option prices equal to
the fair market value of the Class A Common Stock or the Snapple Beverage Common
Stock, as applicable, at the respective dates of grant. The pro forma net income
(loss) and basic and diluted net income (loss) per share set forth in Note 1
adjusts such data as set forth in the accompanying consolidated income
statements to reflect for the Equity Plans and, through October 25, 2000, for
the Snapple Beverage Plan (1) the reversal of stock-based employee compensation
expense determined under the intrinsic value method included in reported net
income, (2) the recognition of total stock-based employee compensation expense
for all 1995 through 2002 stock option grants determined under the fair value
method and (3) the income tax effects of each. In 2000 the reduction in
compensation expense recorded in accordance with the intrinsic value method
exceeded the compensation expense based on the fair value method due to the
expense recognized in accordance with the intrinsic value method of (a)
$10,422,000 for the Company's repurchase of Class A Common Stock from certain
officers and a director representing the excess of the market prices on the
dates of purchase by the Company over the exercise prices of the underlying
stock options and (b) $5,885,000 related to certain employees of Snapple
Beverage Group and Royal Crown who surrendered 856,169 stock options for
Triarc's Class A Common Stock prior to the Snapple Beverage Sale for cash, at
prices in excess of the exercise prices of the underlying stock options, both as
disclosed in more detail above.

    The fair value of stock options granted under the Equity Plans on the date
of grant was estimated using the Black-Scholes option pricing model with the
weighted average assumptions set forth below. The fair value of stock options
granted in 2000 under the Snapple Beverage Plan was assumed to be their
intrinsic value since such options were issued shortly before the October 25,
2000 date of the Snapple Beverage Sale.

82







TRIARC COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
DECEMBER 29, 2002



                                                              2000   2001   2002
                                                              ----   ----   ----
                                                                   
Risk-free interest rate.....................................  5.19%  4.73%  3.68%
Expected option life in years...............................   7      7      7
Expected volatility.........................................  32.2%  17.0%  18.5%
Dividend yield..............................................  None   None   None


    The Black-Scholes option pricing model has limitations on its effectiveness
including that it was developed for use in estimating the fair value of traded
options which have no vesting restrictions and are fully transferable and that
the model requires the use of highly subjective assumptions including expected
stock price volatility. Because the Company's stock-based awards to employees
have characteristics significantly different from those of traded options and
because changes in the subjective input assumptions can materially affect the
fair value estimate, in the opinion of the Company, the existing models do not
necessarily provide a reliable single measure of the fair value of its
stock-based awards to employees.

(15) CAPITAL MARKET TRANSACTION RELATED COMPENSATION

    The capital market transaction related compensation results from incentive
compensation directly related to the consummation of the Snapple Beverage Sale
in October 2000 and the issuance of the Securitization Notes in November 2000
consisting of (1) an aggregate of $22,500,000 to the Executives which was
invested in two deferred compensation trusts (the 'Deferred Compensation
Trusts') for their benefit in January 2001 (see Note 23) and (2) $3,510,000 paid
to other officers and employees in January 2001. The incentive compensation
payable to the Executives, together with investment income on the Deferred
Compensation Trusts, is included in 'Deferred compensation payable to related
parties' in the accompanying consolidated balance sheets.

(16) INVESTMENT INCOME, NET

    Investment income, net consisted of the following components (in thousands):



                                                        2000      2001       2002
                                                        ----      ----       ----
                                                                  
Interest income......................................  $16,478   $31,796   $ 10,910
Distributions, including dividends...................    1,599     1,246      2,095
Realized gains on available-for-sale marketable
  securities.........................................    5,752     2,882      2,651
Realized gains (losses) on trading marketable
  securities.........................................    2,190     1,650     (6,495)
Realized gains (losses) on securities sold and
  subsequently purchased.............................   (1,295)     (202)     7,795
Realized gains on sales of investment limited
  partnerships and similar investment entities.......   10,891       573        675
Unrealized losses on trading marketable securities...   (4,848)   (2,033)      (883)
Unrealized gains (losses) on securities sold with an
  obligation to purchase.............................    4,527     2,180     (1,020)
Other than temporary unrealized losses (a)...........   (3,669)   (3,466)   (14,531)
Equity in the earnings (losses) of investment limited
  partnerships and similar investment entities.......     (116)       84         46
Investment fees......................................     (794)   (1,078)      (392)
                                                       -------   -------   --------
                                                       $30,715   $33,632   $    851
                                                       -------   -------   --------
                                                       -------   -------   --------


- ---------

 (a) The Company recognized unrealized losses deemed to be other than temporary
     on certain marketable securities classified as available-for-sale, certain
     investments in limited partnerships, including 280 BT, EBT and 280 KPE
     Holdings, LLC, Encore and certain non-marketable common and preferred
     stocks and
                                              (footnotes continued on next page)

                                                                              83







TRIARC COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
DECEMBER 29, 2002

(footnotes continued from previous page)

     reduced the cost basis of those investments. Such losses were deemed to be
     other than temporary due to declines in the underlying economics of the
     specific security or volatility in capital and lending markets. These
     unrealized losses were before minority interests in 280 BT of $264,000 and
     $3,448,000 in 2001 and 2002, respectively.

(17) OTHER INCOME, NET

    Other income, net consisted of the following income (expense) components (in
thousands):



                                                         2000      2001      2002
                                                         ----      ----      ----
                                                                   
Interest income on note receivable from the Executives
  (Note 23)...........................................  $  --     $   148   $    62
Interest income related to the Snapple Beverage
  Sale (a)............................................     --       8,284       --
Other interest income.................................      686       284       283
Amortization of debt guarantee reserves...............      247       209       324
Sublease rental income................................      327       483       278
Sublease rental expense...............................     (207)     (209)     (180)
Equity in (losses) earnings of investees (Note 8).....   (2,307)     (221)      260
Reduction in fair value of the Written Call Option
  (Note 14)...........................................      653       793        30
Sybra's two-day results of operations (Note 3)........     --        --          15
Settlement of bankruptcy claims with a former
  affiliate previously written off....................      859      --           8
Adjustment to prior period gain on pension
  termination (b).....................................     --          506      --
Gain (loss) on lease termination......................      337       (12)      --
Recognition of deferred gain on sale of restaurants...      471      --         --
Other income..........................................      211        76       346
Other expenses........................................      (36)     (150)      (68)
                                                        -------   -------   -------
                                                        $ 1,241   $10,191   $ 1,358
                                                        -------   -------   -------
                                                        -------   -------   -------


- ---------

 (a) The Company received $8,284,000 of interest income on the $200,000,000
     payment by Cadbury for the Tax Election (see Note 3) in accordance with a
     Snapple Beverage Sale tax agreement. Such interest income was recognized in
     2001 when the Tax Election was made and was for the period from
     December 9, 2000 (45 days after the October 25, 2000 Snapple Beverage Sale
     date) through the date of payment of the $200,000,000 on June 14, 2001.

 (b) The Company received $1,461,000 of compensation in 2001 resulting from the
     demutualization of the insurance company from which a group annuity
     contract was purchased in July 1987 to provide for pension payments to
     participants in connection with the settlement of certain pension
     obligations associated with the termination of a pension plan effective
     June 1985. Of such compensation, $506,000 related to continuing operations
     and is included above in 'Other income, net' and $955,000 related to the
     discontinued operations associated with the Snapple Beverage Sale and is
     included, net of income taxes, in the 'Gain on disposal' component of
     'Total income from discontinued operations' in 2001.

(18) DISCONTINUED OPERATIONS

    On October 25, 2000, the Company consummated the Snapple Beverage Sale (see
Note 3) and, as set forth in Note 1, these beverage businesses have been
accounted for as discontinued operations (the 'Beverage Discontinued
Operations') in 2000 through the date of sale. Further, prior to 2000 the
Company sold the stock or the principal assets of the companies comprising
SEPSCO's utility and municipal services and refrigeration business segments (the
'SEPSCO Discontinued Operations') which have been accounted for as discontinued

84







TRIARC COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
DECEMBER 29, 2002

operations and of which there remain certain obligations not transferred to the
buyers of the discontinued businesses to be liquidated and incidental properties
of the refrigeration business to be sold.

    The income (loss) from discontinued operations consisted of the following
(in thousands):



                                                        2000      2001      2002
                                                        ----      ----      ----
                                                                  
Loss from operations, plus income tax provision of
  $915..............................................  $ (8,868)  $ --      $ --
Gain on the disposal of the Former Beverage
  Businesses (see Note 3), net of income tax
  provisions of $226,765 during 2000 and $145,533
  during 2001 and representing an income tax benefit
  of $11,100 during 2002............................   480,946    43,450    11,100
                                                      --------   -------   -------
    Total income from discontinued operations.......  $472,078   $43,450   $11,100
                                                      --------   -------   -------
                                                      --------   -------   -------


    The loss from discontinued operations relating to the Former Beverage
Businesses from January 3, 2000 through their date of sale of October 25, 2000
consisted of the following (in thousands):

                                                           
Revenues and other income...................................  $681,063
Loss before income taxes....................................    (7,953)
Provision for income taxes..................................      (915)
Net loss....................................................    (8,868)



    The Company's discontinued operations had a provision for income taxes
despite a loss before income taxes in 2000 principally due to (1) the
amortization of non-deductible unamortized costs in excess of net assets of
acquired companies and (2) the differing impact of the mix of pretax loss or
income among the combined entities since the Company files state income tax
returns on an individual company basis.

    Net current liabilities relating to discontinued operations as of December
30, 2001 and December 29, 2002 consisted of the following (in thousands):



                                                                  YEAR-END
                                                              -----------------
                                                               2001      2002
                                                               ----      ----
                                                                  
Accrued expenses, including accrued income taxes, of the
  Beverage Discontinued Operations..........................  $29,067   $30,316
Net liabilities of the SEPSCO Discontinued Operations (net
  of assets held for sale of $234)..........................    2,895     2,767
                                                              -------   -------
                                                              $31,962   $33,083
                                                              -------   -------
                                                              -------   -------


    Accrued expenses, including accrued income taxes, of the Beverage
Discontinued Operations as of December 29, 2002 represent remaining liabilities
payable with respect to the Beverage Discontinued Operations. The net
liabilities of SEPSCO Discontinued Operations principally represent liabilities
that have not been liquidated as of December 29, 2002. The Company expects that
the liquidation of the remaining liabilities associated with both the Beverage
Discontinued Operations and the SEPSCO Discontinued Operations as of December
29, 2002 will not have any material adverse impact on its financial position or
results of operations.

(19) EXTRAORDINARY CHARGES

    The 2000 extraordinary charges resulted from the early assumption or
extinguishment, as applicable, of (1) the Senior Notes co-issued by TCPG and
Snapple Beverage Group, (2) the Beverage Credit Facility maintained by Snapple,
Mistic, Stewart's, Royal Crown and RC/Arby's and (3) the Triarc Debentures.
These extraordinary charges consisted of (1) the write-off of previously
unamortized deferred financing costs of $27,491,000, (2) the payment of
prepayment penalties of $5,509,000 and (3) fees of $17,000, all less income tax
benefit of $12,337,000.

                                                                              85







TRIARC COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
DECEMBER 29, 2002

(20) RETIREMENT BENEFIT PLANS

    The Company maintains two 401(k) defined contribution plans (the '401(k)
Plans') covering all of its employees who meet certain minimum requirements and
elect to participate, including employees of Sybra subsequent to December 27,
2002. Under the provisions of the 401(k) Plans, employees may contribute various
percentages of their compensation ranging up to a maximum of 20% (15% prior to
January 1, 2002) for one of the 401(k) Plans and 15% for the other plan, subject
to certain limitations. One of the 401(k) Plans provides for Company matching
contributions at 50% of employee contributions up to the first 6% thereof,
whereas the other plan does not currently provide for matching contributions. In
addition, the 401(k) Plans permit discretionary annual Company profit-sharing
contributions to be determined by the employer regardless of whether the
employee otherwise elects to participate in the 401(k) Plans. In connection with
both of these employer contributions, the Company provided $924,000, $1,004,000
and $1,174,000 as compensation expense in 2000, 2001 and 2002, respectively.

    The Company maintains two defined benefit plans for eligible employees
through December 31, 1988 of certain subsidiaries, benefits under which were
frozen in 1992. After recognizing a curtailment gain upon freezing the benefits,
the Company has no unrecognized prior service cost related to these plans.

    A reconciliation of the beginning and ending balances of the accumulated
benefit obligations and the fair value of the plans' assets and a reconciliation
of the resulting funded status of the plans to the net amount recognized are (in
thousands):



                                                               2001     2002
                                                               ----     ----
                                                                 
Change in accumulated benefit obligations:
    Accumulated benefit obligations at beginning of year....  $3,902   $3,788
    Service cost (consisting entirely of plan expenses).....      91      118
    Interest cost...........................................     254      254
    Actuarial loss..........................................     116    1,091
    Benefit payments........................................    (433)    (366)
    Plan expense payments...................................    (142)    (114)
                                                              ------   ------
    Accumulated benefit obligations at end of year..........   3,788    4,771
                                                              ------   ------
Change in fair value of the plans' assets:
    Fair value of the plans' assets at beginning of year....   4,074    3,878
    Actual gain (loss) on the plans' assets.................     379      (56)
    Company contributions...................................      --      431
    Benefit payments........................................    (433)    (366)
    Plan expense payments...................................    (142)    (114)
                                                              ------   ------
    Fair value of the plans' assets at end of year..........   3,878    3,773
                                                              ------   ------
Funded (unfunded) status at end of year.....................      90     (998)
Unrecognized net actuarial and investment (gain) loss.......      (4)   1,456
                                                              ------   ------
    Net amount recognized...................................  $   86   $  458
                                                              ------   ------
                                                              ------   ------


86







TRIARC COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
DECEMBER 29, 2002

    The net amount recognized in the consolidated balance sheets consisted of
the following (in thousands):



                                                                 YEAR-END
                                                              --------------
                                                              2001     2002
                                                              ----     ----
                                                                
Accrued pension liability reported in 'Other liabilities,
  deferred income and minority interests in a consolidated
  subsidiary'...............................................  $(148)  $ (998)
Unrecognized pension loss reported in 'Accumulated other
  comprehensive income (deficit)' component of
  'Stockholders' equity'....................................    234    1,456
                                                              -----   ------
    Net amount recognized...................................  $  86   $  458
                                                              -----   ------
                                                              -----   ------


    As of December 30, 2001, one of the plans had an accumulated benefit
obligation of $1,756,000 which was in excess of the fair value of the plan
assets of $1,445,000. As of December 29, 2002, both plans have accumulated
benefit obligations in excess of the fair value of each of the plans' assets.

    The components of the net periodic pension cost (credit) are as follows (in
thousands):



                                                             2000    2001    2002
                                                             ----    ----    ----
                                                                    
Service cost (consisting entirely of plan expenses)........  $  38   $  91   $ 118
Interest cost..............................................    269     254     254
Expected return on the plans' assets.......................   (335)   (296)   (314)
Amortization of unrecognized net (gain) loss...............     (9)     (3)      1
                                                             -----   -----   -----
    Net periodic pension cost (credit).....................  $ (37)  $  46   $  59
                                                             -----   -----   -----
                                                             -----   -----   -----


    The unrecognized pension loss in 2000 and 2002, and the recovery in 2001,
less related deferred income taxes, has been reported as 'Unrecognized pension
loss' and 'Recovery of unrecognized pension loss,' respectively, as components
of comprehensive income (loss) reported in the accompanying consolidated
statements of stockholders' equity (deficit) consisting of the following (in
thousands):



                                                            2000    2001    2002
                                                            ----    ----    ----
                                                                  
Unrecognized pension (loss) recovery......................  $(320)  $ 87   $(1,222)
Deferred income tax benefit (provision)...................    122    (33)      438
                                                            -----   ----   -------
                                                            $(198)  $ 54   $  (784)
                                                            -----   ----   -------
                                                            -----   ----   -------


    The actuarial assumptions used in measuring the net periodic pension cost
(credit) and accumulated benefit obligations are as follows:



                                                                2000    2001    2002
                                                                ----    ----    ----
                                                                       
Net periodic pension cost (credit):
    Expected long-term rate of return on plan assets........    8.0%    8.0%    8.0%
    Discount rate...........................................    7.5%    7.5%    7.0%
Benefit obligations as of end of year:
    Discount rate...........................................            7.0%    5.5%


    The effect of the decrease in the discount rate used in measuring the net
periodic pension cost from 2001 to 2002 resulted in a decrease in the net
periodic pension cost of $6,000. The decrease in the discount rate used in
measuring the accumulated benefit obligations from 2001 to 2002 resulted in an
increase in the accumulated benefit obligations of $535,000. In addition, a
change in the mortality table used in determining the accumulated benefit
obligations from 2001 to 2002 resulted in an additional increase of $427,000.
Both of these increases in the accumulated benefit obligations are reflected in
the 'Actuarial loss' component of the change in accumulated benefit obligations
during 2002 above.

                                                                              87







TRIARC COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
DECEMBER 29, 2002

(21) LEASE COMMITMENTS

    The Company leases real property and transportation, restaurant and office
equipment, principally related to Sybra. Some leases related to restaurant
operations provide for contingent rentals based on sales volume.

    Rental expense under operating leases consisted of the following components
(in thousands):



                                                           2000     2001     2002
                                                           ----     ----     ----
                                                                   
Minimum rentals.........................................  $3,882   $4,154   $4,133
Contingent rentals......................................    --       --          6
                                                          ------   ------   ------
                                                           3,882    4,154    4,139
Less sublease income....................................     327      483      278
                                                          ------   ------   ------
                                                          $3,555   $3,671   $3,861
                                                          ------   ------   ------
                                                          ------   ------   ------


    The Company has recorded $3,274,000 of 'Favorable leases' included in 'Other
intangible assets' (see Note 9) and $15,506,000 of unfavorable leases included
in 'Other liabilities, deferred income and minority interests in a consolidated
subsidiary.' The Company's future minimum rental payments, reduced by the
$12,232,000 of net unfavorable leases the Company has provided as previously set
forth and excluding (1) the lease obligations assumed by RTM Restaurant Group,
Inc. in connection with the May 1997 sale of restaurants (see Note 22) and
(2) sublease rental receipts for noncancelable leases having an initial lease
term in excess of one year as of December 29, 2002 are as follows (in
thousands):



                                                                              SUBLEASE
                                                     RENTAL PAYMENTS       RENTAL RECEIPTS
                                                 -----------------------   ---------------
                                                 CAPITALIZED   OPERATING      OPERATING
FISCAL YEAR                                        LEASES       LEASES         LEASES
- -----------                                        ------       ------         ------
                                                                  
2003...........................................    $ 1,486     $ 16,250        $  391
2004...........................................      1,481       14,315           349
2005...........................................      1,169       12,507           282
2006...........................................        798       11,058           282
2007...........................................        554       10,684           179
Thereafter.....................................      4,651       77,015           176
                                                   -------     --------        ------
    Total minimum payments.....................     10,139     $141,829        $1,659
                                                               --------        ------
                                                               --------        ------
Less interest..................................      4,491
                                                   -------
Present value of minimum capitalized lease
  payments.....................................    $ 5,648
                                                   -------
                                                   -------


    The present value of minimum capitalized lease payments is included either
with 'Long-term debt' or 'Current portion of long-term debt,' as applicable, in
the accompanying consolidated balance sheet as of December 29, 2002 (see
Note 10).

(22) GUARANTEES

    National Propane retains a less than 1% special limited partner interest in
its former propane business, now known as AmeriGas Eagle Propane, L.P.
('AmeriGas Eagle'). National Propane agreed that while it remains a special
limited partner of AmeriGas Eagle, National Propane would indemnify (the
'Indemnification') the owner of AmeriGas Eagle for any payments the owner makes
related to the owner's obligations under certain of the debt of AmeriGas Eagle,
aggregating approximately $138,000,000 as of December 29, 2002, if AmeriGas
Eagle is unable to repay or refinance such debt, but only after recourse by the
owner to the assets of AmeriGas Eagle. National Propane's principal asset is an
intercompany note receivable from Triarc in the amount of $30,000,000 as of
December 29, 2002, which amount was increased to $50,000,000 as of January 1,
2003. The Company believes it is unlikely that it will be called upon to make
any payments under the

88







TRIARC COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
DECEMBER 29, 2002

Indemnification. In August 2001, AmeriGas Propane L.P. ('AmeriGas Propane')
purchased all of the interests in AmeriGas Eagle other than National Propane's
special limited partner interest. Either National Propane or AmeriGas Propane
may require AmeriGas Eagle to repurchase the special limited partner interest.
However, the Company believes it is unlikely that either party would require
repurchase prior to 2009 as either AmeriGas Propane would owe the Company tax
indemnification payments if AmeriGas Propane required the repurchase or the
Company would accelerate payment of deferred taxes associated with the July 1999
sale of the propane business if National Propane required the repurchase.

    Triarc has guaranteed obligations under mortgage and equipment notes payable
through 2015 (the 'Mortgage and Equipment Notes Guarantee') which were assumed
by subsidiaries of RTM Restaurant Group, Inc. ('RTM'), the largest franchisee in
the Arby's system, in connection with the May 1997 sale of all 355 of the then
Company-owned restaurants to RTM (the 'Restaurant Sale'), of which approximately
$44,000,000 and $42,000,000 were outstanding as of December 30, 2001 and
December 29, 2002, respectively.

    In connection with the Restaurant Sale, substantially all lease obligations
associated with the sold restaurants were also assumed by RTM, although the
Company remains contingently liable if the future lease payments, which extend
through 2031 including all then existing extension or renewal option periods,
are not made by RTM (the 'Lease Guarantee'). Such lease obligations could
aggregate a maximum of approximately $73,000,000 and $66,000,000 as of
December 30, 2001 and December 29, 2002, respectively, assuming RTM has made all
scheduled payments thereof through those dates.

    The Company also guarantees certain debt of Encore, as disclosed in
Note 23.

    The carrying amounts of the Mortgage and Equipment Notes Guarantee, the
Lease Guarantee and the guarantee of Encore senior notes (see Note 23)
aggregated $992,000 and $669,000 as of December 30, 2001 and December 29, 2002,
respectively. Such carrying amounts are included in 'Other liabilities, deferred
income and minority interests in a consolidated subsidiary' in the accompanying
consolidated balance sheets (see Note 12).

(23) TRANSACTIONS WITH RELATED PARTIES

    Deferred compensation expense of $1,856,000 and $1,350,000 was recognized in
2001 and 2002, respectively, for increases in the fair value of the investments
in the Deferred Compensation Trusts. Under accounting principles generally
accepted in the United States of America, the Company recognized investment
income of $171,000 on the investments in the Deferred Compensation Trusts during
2001 but was not able to recognize any investment income on the increase in the
value of those investments during 2002. This disparity between compensation
expense and investment income recognized will reverse in future periods as
either (1) the investments in the Deferred Compensation Trusts are sold and
previously unrealized gains are recognized without any offsetting increase in
compensation expense or (2) the fair values of the investments in the Deferred
Compensation Trusts decrease resulting in the recognition of a reduction of
deferred compensation expense without any offsetting losses recognized in
investment income. Investment income on the Deferred Compensations Trusts is
included in 'Investment income, net' and Deferred compensation expense is
included in 'General and administrative' in the accompanying consolidated income
statements. The obligation to the Executives is reported as 'Deferred
compensation payable to related parties' and the investments in the Deferred
Compensation Trusts are included in 'Investments' in the accompanying
consolidated balance sheets.

    The Company leased a helicopter until April 4, 2002 from a subsidiary of
Triangle Aircraft Services Corporation ('TASCO'), a company owned by the
Executives, under a dry lease which was scheduled to expire in September 2002.
Annual rent for the helicopter was $369,000 from January 19, 2000 through
September 30, 2000, and increased to $382,000 and $392,000 as of October 1, 2000
and October 1, 2001, respectively, as a result of annual cost of living
adjustments. The Company terminated its lease effective April 1, 2002 and paid
$150,000 to TASCO to be released from all of its remaining obligations under the
lease, including a then remaining rental obligation of $196,000. In addition,
the Company leased an airplane

                                                                              89







TRIARC COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
DECEMBER 29, 2002

until January 19, 2000 from 280 Holdings, LLC, a then subsidiary of TASCO,
pursuant to a dry lease for base annual rent which as of January 2, 2000 was
$3,078,000. On January 19, 2000 the Company acquired the airplane through its
acquisition of 280 Holdings, LLC for $27,210,000 consisting of cash of
$9,210,000 and the assumption of the $18,000,000 Promissory Note. The purchase
price was based on independent appraisals and was approved by the Company's
audit committee and board of directors. Under the terms of the dry lease for
both aircraft, the Company paid the operating expenses, including repairs and
maintenance, of the aircraft directly to third parties. The aggregate expense
attributable to lease related payments to TASCO, including the amortization of a
lease option entered into in 1997 aggregated $574,000, $385,000 and $248,000 for
2000, 2001 and 2002, respectively. On January 19, 2000 the Company was
reimbursed $1,200,000 by TASCO representing the return of substantially all of
the remaining unamortized amount paid for the lease option.

    A class action lawsuit relating to certain awards of compensation to the
Executives in 1994 through 1997 was settled effective March 1, 2001 whereby,
among other things, (1) the Company received an interest-bearing note (the
'Executives' Note') from the Executives, in the aggregate amount of $5,000,000,
receivable in three equal installments due March 31, 2001, 2002 and 2003 and
(2) as set forth in Note 14, the Executives surrendered an aggregate of 775,000
stock options awarded to them in 1994. The Company recorded the $5,000,000
during 2001 as a reduction of compensation expense included in 'General and
administrative' in the accompanying consolidated income statement for the year
ended December 30, 2001, since the settlement effectively represents an
adjustment of prior period compensation expense. The Executives' Note bore
interest initially at 6% per annum and, in accordance with its terms, was
adjusted on April 2, 2001 to 4.92% per annum and was again adjusted on April 1,
2002 to 1.75%. The Company recorded interest income on the Executives' Note of
$148,000 and $62,000 during 2001 and 2002, respectively. During 2001 and 2002
the Company collected the first and second installments aggregating $3,333,000
on the Executives' Note plus related interest. The remaining balance of the
Executives' Note of $1,667,000 as of December 29, 2002 is included in
'Receivables' in the accompanying consolidated balance sheet.

    The Company's president and chief operating officer has an equity interest
in a franchisee that owns an Arby's restaurant. That franchisee is a party to a
standard Arby's franchise license agreement and pays to Arby's fees and royalty
payments that unaffiliated third-party franchisees pay. Under an arrangement
that pre-dated the Sybra Acquisition, Sybra manages the restaurant for the
franchisee and has not received any compensation for its services during 2002.

    As part of its overall retention efforts, the Company has provided certain
of its management officers and employees, including its executive officers, the
opportunity to co-invest with the Company in certain investments and made
related loans to management through December 30, 2001. The Company did not enter
into any new co-investments or make any co-investment loans to management
officers or employees during 2002 and management notified the Company's board of
directors that the Company does not intend to make any further co-investment
loans. Moreover, under the Sarbanes-Oxley Act of 2002, the Company is not
permitted to make any new loans to its executive officers. The co-investment and
corporate opportunity policy, as amended in May 2001 and approved by the
Company's audit committee, provided that the Company could make loans to
management, not to exceed an aggregate of $5,750,000 principal amount
outstanding, where the Company's portion of the aggregate co-investment was at
least 20%. Each loan could not exceed two-thirds of the total amount to be
invested by any member of management in a co-investment and was to be evidenced
by promissory notes, of which at least one-half were to be recourse notes,
secured by such member's co-investment shares. The promissory notes were to
mature no later than the lesser of (1) five years, (2) the sale of the
investment by the officer or employee or (3) the termination of employment of
the officer or employee; and bear interest at the prime rate payable annually in
arrears. The Company and certain of its management had entered into four
co-investments in accordance with this policy: (1) EBT (see Note 8), (2) 280 KPE
Holdings, LLC ('280 KPE'), (3) K12 Inc. ('K12'), a Cost Investment and
(4) 280 BT (see Note 6). EBT, 280 KPE and 280 BT are limited liability holding
companies principally owned by the Company and present and former company
management that, among other parties, invested in operating companies. The
investment in K12,

90







TRIARC COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
DECEMBER 29, 2002

however, is directly in the operating company. The underlying investments held
by EBT and 280 KPE became worthless. Information pertaining to each of these
co-investments is as follows (dollars in thousands):



                                      EBT         280 KPE        K12         280 BT
                                      ---         -------        ---         ------
                                                              
Ownership percentages at
  December 29, 2002:
    Company....................      18.6%           100%(b)     2.7%          57.4%(c)
    Present and former company
      management...............      56.4%         --   %(b)     0.7%          41.8%
    Unaffiliated...............      25.0%         --   %       96.6%           0.8%

Received from management on
  date of co-investment:         December 1999   March 2000   July 2001   November 2001
    Cash.......................      $376           $677        $222         $  825
    Recourse notes.............       376            600         222            825
    Non-recourse notes.........       376            600         222            825

Management notes outstanding at
  December 29, 2002:
    Principal balance..........      $353 (a)     $--   (b)     $444         $1,550 (c)
    Allowance for uncollectible
      non-recourse notes (a)...      (176)(a)      --            --            (393)(d)
    Accrued interest...........        --          --   (b)        9              6
    Interest rate (reset
      annually)................      4.25%         --           4.75%          4.25%


- ---------

 (a) Reflects the collection of $90,000 in 2002 and an allowance for
     uncollectible notes established in 2002 for outstanding non-recourse notes
     due to the worthlessness of the investments by EBT during 2002. The related
     provision for uncollectible notes of $176,000 is included in 'General and
     administrative' in the accompanying consolidated income statement for 2002.
     In addition, $5,000 of accrued interest associated with the non-recourse
     notes was also written off as a reduction of the 'Other interest income'
     component of 'Other income, net' (see Note 17) in 2002.

 (b) Reflects the collection of $3,000 in 2000, the reduction of $762,000 in
     2001 for the release for future investment obligations which were never
     drawn upon and the write-off of $219,000 in 2001 of non-recourse notes
     which were forgiven in 2002 due to the worthlessness of the underlying
     investments held by 280 KPE and included in 'General and administrative' in
     the accompanying consolidated income statement for 2001. In addition,
     $14,000 of accrued interest associated with the non-recourse notes forgiven
     was also written off as a reduction of the 'Other interest income'
     component of 'Other income, net' (see Note 17) in 2001. The remaining
     $216,000 of recourse notes and related accrued interest was collected
     during 2002. Prior to the surrender of all their interests in 280 KPE to
     the Company upon the forgiveness of the non-recourse notes, present and
     former company management owned 74.7% and the Company owned the remaining
     25.3% of 280 KPE.

 (c) Reflects the collection of $50,000 in 2002 and the surrender in 2002 by a
     former Company officer of 1.5% of his 2.5% co-investment interest in 280 BT
     to the Company in settlement of a $50,000 non-recourse loan, which resulted
     in an increase in the Company's ownership percentage to 57.4% from 55.9%.
     Such settlement resulted in a pretax gain to the Company of $48,000
     consisting of a reduction of the minority interests in 280 BT of $100,000
     as a result of the Company now owning the 1.5% surrendered interest less
     the $52,000 charge for the extinguishment of the $50,000 non-recourse note
     and related accrued interest. The reduction of the minority interests was
     included as a credit to 'Minority interests in loss of a consolidated
     subsidiary' and the charge for the extinguishment of the note was included
     in 'General and
                                              (footnotes continued on next page)

                                                                              91







TRIARC COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
DECEMBER 29, 2002

(footnotes continued from previous page)

     administrative' in the accompanying consolidated income statement for the
     year ended December 29, 2002.

 (d) Reflects an allowance for uncollectible notes established in 2002 for the
     portion of the non-recourse notes which the Company estimates will not be
     collected due to declines in value of the underlying investments of 280 BT.
     The related provision of $393,000 was included in 'General and
     administrative' in 2002.

    As indicated above, both the Company and certain of its management officers
made a co-investment in 280 BT in November 2001, which was in addition to a
cash-only co-investment previously made in May 1998. 280 BT invested all of such
November 2001 proceeds in Scientia Preferred Shares. The Company and an officer
who is not one of the Executives and who co-invested in 280 BT had previously
invested in ordinary shares (the 'Scientia Ordinary Shares') of Scientia. The
Scientia Ordinary Shares were acquired for a significantly lower cost per share,
while the Scientia Preferred Shares provide for dividend and liquidation
preferences. The officer owns a higher percentage of Scientia Ordinary Shares
than the Company owns while the officer owns a lower percentage of Scientia
Preferred Shares than the Company owns. The officer could have indirectly
benefited from the lower average cost of his investments compared with that of
the Company's investments. However, because of a substantial decline in value of
the Scientia Ordinary Shares during 2002, it is unlikely the officer will
realize this benefit.

    In addition to the co-investments set forth in the preceding table, the
Company and certain of its officers, including entities controlled by them, have
invested in Encore, resulting in the Company owning 7.2% and present officers
collectively owning 17.2% of Encore's issued and outstanding common stock as of
December 29, 2002. The Company and certain of its then officers and employees
had co-invested in Encore prior to an initial public offering by Encore of its
common stock in July 1999 (the 'Encore IPO'), resulting in the Company acquiring
an 8.4% share and certain of the present and former officers acquiring a 15.7%
collective share, as adjusted for the effect of the Encore IPO. In October 2002
the Company made a restricted stock award of 90,000 shares of Encore common
stock owned by it to an officer of the Company who is not one of the Executives
and who began serving on Encore's board of directors. Such award reduced the
Company's ownership of Encore's common stock by 1.2% to 7.2%. In connection with
this award, the Company recorded the $72,000 fair market value of the Encore
shares as of the date of grant as accrued compensation which is being amortized
to expense ratably over the three-year vesting period of the restricted stock
award. An equal offsetting deferred gain will be amortized to income equally
upon each of the three annual vesting dates.

    In addition, as disclosed in Note 8, during 2002 the Company, certain of its
officers, including entities controlled by them, and other significant
stockholders of Encore invested in the Encore Preferred Stock. If all of the
Encore Preferred Stock were converted, the ownership of the Company and the
present officers in Encore common stock would increase to 13.1% and 23.7%,
respectively.

    On January 12, 2000 the Company entered into a guarantee (the 'Note
Guarantee') of $10,000,000 principal amount of senior notes that mature in
January 2007 (the 'Encore Notes') issued by Encore to a major financial
institution. In consideration for the guarantee, the Company received a fee of
$200,000 and warrants to purchase 100,000 shares of Encore common stock at $.01
per share with an estimated fair value on the date of grant of $305,000. As
disclosed in Note 8, during 2002 the outstanding principal amount of the Encore
Notes was reduced from $10,000,000 to $7,250,000. The $10,000,000 guaranteed
amount has been reduced to $6,698,000 as of December 29, 2002 and the guaranteed
amount will be further reduced by (1) any repayments of the Encore Notes,
(2) any purchases of the Encore Notes by the Company and (3) the amount of
certain investment banking or financial advisory services fees, if any, paid to
the financial institution or its affiliates or, under certain circumstances,
other financial institutions by the Company, Encore or another significant
stockholder of Encore or any of their affiliates. The present and former
officers of the Company, including entities controlled by them, who collectively
owned 15.7% of Encore as of the Encore IPO, are not parties to the Note
Guarantee and could indirectly benefit from it.

92







TRIARC COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
DECEMBER 29, 2002

    In addition to the Note Guarantee, the Company and certain other
stockholders of Encore, including the present and former officers of the Company
who had invested prior to the Encore IPO, on a joint and several basis, have
entered into guarantees (the 'Bank Guarantees') and certain related agreements
to guarantee up to $15,000,000 of revolving credit borrowings of a subsidiary of
Encore. The Company would be responsible for approximately $1,800,000 assuming
the full $15,000,000 was borrowed and all of the parties, other than the
Company, to the Bank Guarantees and the related agreements fully perform
thereunder. As of Encore's year end of December 31, 2002 Encore had $3,933,000
of outstanding revolving credit borrowings. In connection therewith, at December
29, 2002 the Company had $15,018,000 in an interest-bearing bank custodial
account at the financial institution providing the revolving credit line which
under the Bank Guarantees is subject to set off under certain circumstances if
the parties to the Bank Guarantees and related agreements fail to perform their
obligations thereunder. The interest-bearing bank account is included in 'Cash
(including cash equivalents)' in the accompanying consolidated balance sheet as
of December 29, 2002.

    Encore had encountered cash flow and liquidity difficulties in the past.
However, Encore's liquidity and capital were positively impacted by the debt
forgiveness and preferred stock investment referred to above. Encore also has
returned to profitability, and it reported net income available to common
stockholders for its year ended December 31, 2002. The Company currently
believes that it is unlikely the Company will be required to make payments under
the Note Guarantee and/or the Bank Guarantees.

    The Company, the Company's officers who had invested in Encore prior to the
Encore IPO and certain other stockholders of Encore, through a then newly-formed
limited liability company, CTW Funding, LLC ('CTW'), entered into an agreement
on October 31, 2000 to make available to Encore a $2,000,000 revolving credit
facility (the 'Encore Revolver') for working capital purposes which was extended
through December 31, 2001, at which date it expired unused. The Company owned an
8.7% interest in CTW and, had any borrowings under the Encore Revolver occurred,
all members of CTW would have been required to fund such borrowings in
accordance with their percentage interests. In return for its commitment, CTW
received warrants to purchase a total of 250,000 shares of Encore common stock
at $.01 per share with an aggregate estimated fair value on the dates of grant
of $108,000. The Company accounted for its investment in CTW in accordance with
the Equity Method and had equity in the earnings of CTW of $2,000 and $7,000 in
2000 and 2001, respectively, that were fully offset in 2001 by recognizing
equity in losses of Encore. During 2002 CTW exercised the warrants and was then
liquidated, resulting in the Company receiving 21,822 shares of Encore common
stock. Such shares had a less than 0.1% effect on the Company's ownership
percentage of Encore because of the common shares issued to other members of CTW
upon CTW's exercise of the warrants and liquidation.

    The Company also has related party transactions disclosed in Note 14
consisting of the Class B Repurchases from the Posner Entities and stock-based
compensation.

(24) LEGAL AND ENVIRONMENTAL MATTERS

    In 2001, a vacant property owned by Adams, a non-operating subsidiary, 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. Adams engaged an environmental consultant that, under the supervision of
the Florida Department of Environmental Protection (the 'FDEP'), conducted an
investigation of the site that was intended to develop additional information on
the extent and nature of the soil and groundwater contamination and the
appropriate remediation for that contamination. Adams' environmental consultant
has submitted to the FDEP a summary of the results of this investigation and
Adams and the FDEP have negotiated a work plan for further investigation of the
site and limited remediation of the identified contamination. The work plan is
embodied in a consent order between Adams and the FDEP. The consent order has
been executed by Adams

                                                                              93







TRIARC COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
DECEMBER 29, 2002

and by the FDEP subsequent to December 29, 2002 and is effective, subject to a
petition for administrative hearing being filed during the statutory public
comment period. Based on a preliminary cost estimate of approximately $1,000,000
for completion of the work plan developed by Adams' environmental consultant
and, after taking into consideration various legal defenses available to the
Company, including Adams, Adams has provided for its estimate of its liability
for this matter, including related legal and consulting fees. Such provision was
made primarily during the year ended December 29, 2002 principally as a
reduction of 'Gain (loss) on sale of businesses' in the accompanying
consolidated income statement for the year ended December 29, 2002 since the
provision represents an adjustment to the previously recorded gain on the sale
of Adams.

    On March 23, 1999 a stockholder filed a complaint on behalf of persons who
held Triarc Class A Common Stock as of March 10, 1999 which, as amended in April
2000, alleged that the Company's tender offer statement filed with the
Securities and Exchange Commission in 1999, pursuant to which the Company
repurchased 3,805,015 shares of its Class A Common Stock for $18.25 per share,
was materially false and misleading. The amended complaint sought damages in an
unspecified amount, together with prejudgment interest, the costs of suit,
including attorneys' fees, an order permitting all stockholders who tendered
their shares in the tender offer to rescind the transaction and unspecified
other relief. The amended complaint names the Company and the Executives as
defendants. On October 17, 2002 the court presiding over the matter granted the
Company's motion to dismiss this action and subsequently entered a judgment
dismissing the case. On November 21, 2002 the plaintiff filed a notice of
appeal. Subsequent to December 29, 2002, the plaintiff withdrew the appeal.

    In October 1998, various class action lawsuits were filed on behalf of the
Company's stockholders. Each of these actions names the Company, the Executives
and members of the Company's Board of Directors as defendants. On March 26,
1999, certain plaintiffs in these actions filed an amended complaint making
allegations substantially similar to those asserted in the March 23, 1999 action
described in the preceding paragraph. In October 2000, the plaintiffs agreed to
stay this action pending determination of the March 23, 1999 action disclosed in
the preceding paragraph.

    In addition to the environmental matter and stockholder lawsuits described
above, the Company is involved in other litigation and claims incidental to its
business. Triarc and its subsidiaries have reserves for all of their legal and
environmental matters aggregating $2,700,000 as of December 29, 2002. Although
the outcome of such matters cannot be predicted with certainty and some of these
matters may be disposed of unfavorably to the Company, based on currently
available information, including legal defenses available to Triarc and/or its
subsidiaries, and given the aforementioned reserves, the Company does not
believe that the outcome of its legal and environmental matters will have a
material adverse effect on its consolidated financial position or results of
operations.

94







TRIARC COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
DECEMBER 29, 2002

(25) QUARTERLY INFORMATION (UNAUDITED)



                                                             QUARTER ENDED
                                         -----------------------------------------------------
                                         APRIL 1, (b)   JULY 1,   SEPTEMBER 30,   DECEMBER 30,
                                         ------------   -------   -------------   ------------
                                                (IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
                                                                      
2001
- ----
    Revenues, investment income and
      other income (a) (e)..............   $36,677      $39,716      $30,268        $30,485
    Income (loss) from continuing
      operations before income taxes
      and minority interests (a)........    14,400        2,900       (1,214)         1,324
    Income (loss) from continuing
      operations (b)....................     8,208          960       (1,768)         1,566
    Income from discontinued
      operations (Note 18)..............      --         38,517         --            4,933
    Net income (loss)...................     8,208       39,477       (1,768)         6,499
    Basic income (loss) per share (c):
        Continuing operations...........       .37          .04         (.08)           .08
        Discontinued operations.......        --           1.73         --              .24
        Net income (loss)...............       .37         1.77         (.08)           .32
    Diluted income (loss) per share (c):
        Continuing operations...........       .35          .04         (.08)           .07
        Discontinued operations.........      --           1.64         --              .23
        Net income (loss)...............       .35         1.68         (.08)           .30


                                                            QUARTER ENDED
                                         ---------------------------------------------------
                                         MARCH 31,   JUNE 30,   SEPTEMBER 29,   DECEMBER 29,
                                         ---------   --------   -------------   ------------
                                               (IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
                                                                    
2002
- ----
    Revenues, investment income and
      other income (d) (e)..............  $27,873    $19,046       $25,657        $26,197
    Income (loss) from continuing
      operations before income taxes
      and minority interests............     (749)   (10,024)       (6,146)           285
    Income (loss) from continuing
      operations........................   (1,046)    (7,511)       (2,555)         1,355
    Income from discontinued
      operations (Note 18)..............     --         --            --           11,100
    Net income (loss)...................   (1,046)    (7,511)       (2,555)        12,455
    Basic income (loss) per share (c):
        Continuing operations...........     (.05)      (.37)         (.12)           .07
        Discontinued operations.........     --         --            --              .54
        Net income (loss)...............     (.05)      (.37)         (.12)           .61
    Diluted income (loss) per share (c):
        Continuing operations...........     (.05)      (.37)         (.12)           .06
        Discontinued operations.........     --         --            --              .52
        Net income (loss)...............     (.05)      (.37)         (.12)           .58


- ---------

 (a) Revenues, investment income and other income for the quarters ended
     July 1, 2001, September 30, 2001 and December 30, 2001 and income from
     continuing operations before income taxes and minority interests for the
     quarter ended December 30, 2001 have been reclassified to conform with the
     accompanying 2001 full year consolidated income statement.

                                              (footnotes continued on next page)

                                                                              95







TRIARC COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
DECEMBER 29, 2002

(footnotes continued from previous page)

 (b) The income from continuing operations for the quarter ended April 1, 2001
     was materially affected by a credit of $5,000,000, or $3,200,000 net of
     income tax provision of $1,800,000, upon the receipt of the Executives'
     Note in connection with the settlement of a class action lawsuit involving
     certain awards of compensation to the Executives (see Note 23).

 (c) Basic and diluted income (loss) per share have been computed consistently
     with the annual calculations explained in Note 4. Basic and diluted income
     (loss) per share are the same for the quarter ended September 30, 2001 and
     for each of the first three quarters of 2002 since all potentially dilutive
     securities would have had an antidilutive effect based on the loss from
     continuing operations in each of those quarters.

 (d) Revenues, investment income and other income for the quarter ended
     June 30, 2002 reflect certain reclassifications from the Company's
     quarterly report on Form 10-Q to conform with the accompanying 2002 full
     year consolidated statement of operations.

 (e) Revenues are not significantly impacted by seasonality although they are
     somewhat lower in the first quarter. However, investment income for each
     quarter is significantly impacted by, among other things, fluctuations in
     interest rates earned on the Company's investments, timing of sales of
     investments with unrecognized gains or losses and the timing of the
     recognition of Other Than Temporary Losses.

96










ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE.

    Not applicable.

PART III

ITEMS 10, 11, 12 AND 13.

    The information required by items 10, 11, 12 and 13 will be furnished on or
prior to April 29, 2003 (and is hereby incorporated by reference) by an
amendment hereto or pursuant to a definitive proxy statement involving the
election of directors pursuant to Regulation 14A which will contain such
information. Notwithstanding the foregoing, information appearing in the
sections 'Executive Compensation Report of the Compensation Committee and
Performance Compensation Subcommittee' and 'Stock Price Performance Graph' shall
not be deemed to be incorporated by reference in this Form 10-K.

ITEM 14. CONTROLS AND PROCEDURES

    Our management, including our Chairman and Chief Executive Officer and our
Chief Financial Officer, evaluated the effectiveness of our disclosure controls
and procedures within 90 days prior to the filing date of this annual report.
There are inherent limitations to the effectiveness of any system of disclosure
controls and procedures however well designed, including the possibility of
human error and the circumvention or overriding of the controls and procedures.
Accordingly, even effective disclosure controls and procedures can only provide
reasonable assurance of achieving their control objectives. Notwithstanding
these limitations, based upon and as of the date of the evaluation, our Chairman
and Chief Executive Officer and Chief Financial Officer concluded that our
disclosure controls and procedures are effective to ensure that information
required to be included in the reports we file or submit under the Securities
Exchange Act of 1934 is recorded, processed, summarized and reported as and when
required. No significant changes were made to our internal controls or in other
factors that could significantly affect these controls subsequent to the date of
their evaluation.

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.

(a) 1. Financial Statements:

       See Index to Financial Statements (Item 8).

    2. Financial Statement Schedules:

    All schedules have been omitted since they are either not applicable or the
information is contained elsewhere in 'Item 8. Financial Statements and
Supplementary Data.'

    3. Exhibits:

    Copies of the following exhibits are available at a charge of $.25 per page
upon written request to the Secretary of Triarc at 280 Park Avenue, New York,
New York 10017.



EXHIBIT
  NO.                           DESCRIPTION
  ---                           -----------
     
  2.1  -- Agreement and Plan of Merger dated September 15, 2000,
          among Cadbury Schweppes plc, CSN Acquisition Inc., CRC
          Acquisition Inc., Triarc Companies, Inc., Snapple Beverage
          Group, Inc. and Royal Crown Company, Inc., incorporated
          herein by reference to Exhibit 2.1 to Triarc's Current
          Report on Form 8-K dated September 20, 2000 (SEC file
          no. 1-2207).
  2.2  -- Triarc Companies, Inc.'s Third Amended Joint Plan of
          Reorganization Under Chapter 11 of the Bankruptcy Code for
          ICH Corporation, Sybra, Inc. and Sybra of Connecticut,
          Inc., dated November 22, 2002, incorporated herein by
          reference to Exhibit 2.1 to Triarc's Current Report on
          Form 8-K dated November 27, 2002 (SEC file no. 1-2207).


                                                                              97










EXHIBIT
  NO.                           DESCRIPTION
  ---                           -----------
     
  2.3  -- Findings of Fact, Conclusions of Law, and Order Under
          Section 1129(a) of the Bankruptcy Code and Rule 3020 of
          the Bankruptcy Rules Confirming Triarc Companies, Inc.'s
          Third Amended Joint Plan of Reorganization Under Chapter
          11 for ICH Corporation, Sybra, Inc. and Sybra of
          Connecticut, Inc., dated November 22, 2002, incorporated
          herein by reference to Exhibit 2.2 to Triarc's Current
          Report on Form 8-K dated November 27, 2002 (SEC file
          no. 1-2207).
  2.4  -- Purchase and Funding Agreement dated as of December 27,
          2002 between Triarc Restaurant Holdings, LLC and I.C.H.
          Corporation, incorporated herein by reference to Exhibit
          2.1 to Triarc's Current Report on Form 8-K dated
          December 27, 2002 (SEC file no. 1-2207).
  3.1  -- Certificate of Incorporation of Triarc, as currently in
          effect, incorporated herein by reference to Exhibit 3.1 to
          Triarc's Current Report on Form 8-K dated November 9, 2001
          (SEC file no. 1-2207).
  3.2  -- By-laws of Triarc, as currently in effect, incorporated
          herein by reference to Exhibit 3.1 to Triarc's Current
          Report on Form 8-K dated November 12, 2002 (SEC file
          no. 1-2207).
  4.1  -- Master Agreement dated as of May 5, 1997, among Franchise
          Finance Corporation of America, FFCA Acquisition
          Corporation, FFCA Mortgage Corporation, Triarc, Arby's
          Restaurant Development Corporation ('ARDC'), Arby's
          Restaurant Holding Company ('ARHC'), Arby's Restaurant
          Operations Company ('AROC'), Arby's, RTM Operating
          Company, RTM Development Company, RTM Partners, Inc.
          ('Holdco'), RTM Holding Company, Inc., RTM Management
          Company, LLC and RTM, Inc. ('RTM'), incorporated herein by
          reference to Exhibit 4.16 to Triarc's Registration
          Statement on Form S-4 dated October 22, 1997 (SEC file
          no. 1-2207).
  4.2  -- Indenture dated as of February 9, 1998 between Triarc
          Companies, Inc. and The Bank of New York, as Trustee,
          incorporated herein by reference to Exhibit 4.1 to
          Triarc's Current Report on Form 8-K/A dated March 6, 1998
          (SEC file no. 1-2207).
  4.3  -- Supplemental Indenture No. 1, dated as of October 25,
          2000, by and among Triarc Companies, Inc., SBG Holdings
          Inc. and The Bank of New York, incorporated herein by
          reference to Exhibit 4.1 to Triarc's Current Report on
          Form 8-K dated November 8, 2000 (SEC file no. 1-2207).
  4.4  -- Indenture dated as of November 21, 2000 among Arby's
          Franchise Trust, as issuer, Ambac Assurance Corporation,
          as insurer, and BNY Midwest Trust Company, a Bank of New
          York Company, as Indenture Trustee, incorporated herein by
          reference to Exhibit 4.2 to Triarc's Current Report on
          Form 8-K dated March 30, 2001 (SEC file no. 1-2207).
 10.1  -- Triarc's 1993 Equity Participation Plan, as amended,
          incorporated herein by reference to Exhibit 10.1 to
          Triarc's Current Report on Form 8-K dated March 31, 1997
          (SEC file no. 1-2207).
 10.2  -- Form of Non-Incentive Stock Option Agreement under
          Triarc's Amended and Restated 1993 Equity Participation
          Plan, incorporated herein by reference to Exhibit 10.2 to
          Triarc's Current Report on Form 8-K dated March 31, 1997
          (SEC file no. 1-2207).
 10.3  -- Form of Restricted Stock Agreement under Triarc's Amended
          and Restated 1993 Equity Participation Plan, incorporated
          herein by reference to Exhibit 13 to Triarc's Current
          Report on Form 8-K dated April 23, 1993 (SEC file
          no. 1-2207).
 10.4  -- Form of Indemnification Agreement, between Triarc and
          certain officers, directors, and employees of Triarc,
          incorporated herein by reference to Exhibit F to the 1994
          Proxy (SEC file no. 1-2207).
 10.5  -- Guaranty dated as of May 5, 1997 by RTM, RTM Parent,
          Holdco, RTMM and RTMOC in favor of Arby's, ARDC, ARHC,
          AROC and Triarc, incorporated herein by reference to
          Exhibit 10.31 to Triarc's Registration Statement on
          Form S-4 dated October 22, 1997 (SEC file no. 1-2207).
 10.6  -- Triarc Companies, Inc. 1997 Equity Participation Plan
          (the '1997 Equity Plan'), incorporated herein by reference
          to Exhibit 10.5 to Triarc's Current Report on Form 8-K
          dated March 16, 1998 (SEC file no. 1-2207).
 10.7  -- Form of Non-Incentive Stock Option Agreement under the
          1997 Equity Plan, incorporated herein by reference to
          Exhibit 10.6 to Triarc's Current Report on Form 8-K dated
          March 16, 1998 (SEC file no. 1-2207).
 10.8  -- Triarc's 1998 Equity Participation Plan, as currently in
          effect, incorporated herein by reference to Exhibit 10.1
          to Triarc's Current Report on Form 8-K dated May 13, 1998
          (SEC file no. 1-2207).
 10.9  -- Form of Non-Incentive Stock Option Agreement under
          Triarc's 1998 Equity Participation Plan, incorporated
          herein by reference to Exhibit 10.2 to Triarc's Current
          Report on Form 8-K dated May 13, 1998 (SEC file
          no. 1-2207).
 10.10 -- Form of Guaranty Agreement dated as of March 23, 1999
          among National Propane Corporation, Triarc Companies, Inc.
          and Nelson Peltz and Peter W. May, incorporated herein by
          reference to Exhibit 10.30 to Triarc's Annual Report on
          Form 10-K for the fiscal year ended January 3, 1999 (SEC
          file no. 1-2207).


98










EXHIBIT
  NO.                           DESCRIPTION
  ---                           -----------
     
 10.11 -- 1999 Executive Bonus Plan, incorporated herein by
          reference to Exhibit A to Triarc's 1999 Proxy Statement
          (SEC file no. 1-2207).
 10.12 -- Employment Agreement dated as of May 1, 1999 between
          Triarc and Nelson Peltz, incorporated herein by reference
          to Exhibit 10.1 to Triarc's Current Report on Form 8-K
          dated March 30, 2000 (SEC file no. 1-2207).
 10.13 -- Employment Agreement dated as of May 1, 1999 between
          Triarc and Peter W. May, incorporated herein by reference
          to Exhibit 10.2 to Triarc's Current Report on Form 8-K
          dated March 30, 2000 (SEC file no. 1-2207).
 10.14 -- Employment Agreement dated as of February 24, 2000
          between Triarc and Brian L. Schorr, incorporated herein by
          reference to Exhibit 10.5 to Triarc's Current Report on
          Form 8-K dated March 30, 2000 (SEC file no. 1-2207).
 10.15 -- Deferral Plan for Senior Executive Officers of Triarc
          Companies, Inc., incorporated herein by reference to
          Exhibit 10.1 to Triarc's Current Report on Form 8-K dated
          March 30, 2001 (SEC file no. 1-2207).
 10.16 -- Trust Agreement for the Deferral Plan for Senior
          Executive Officers of Triarc Companies, Inc., dated as of
          January 23, 2001, between Triarc and Wilmington Trust
          Company, as trustee, incorporated herein by reference to
          Exhibit 10.2 to Triarc's Current Report on Form 8-K dated
          March 30, 2001 (SEC file no. 1-2207).
 10.17 -- Trust Agreement for the Deferral Plan for Senior
          Executive Officers of Triarc Companies, Inc., dated as of
          January 23, 2001, between Triarc and Wilmington Trust
          Company, as trustee, incorporated herein by reference to
          Exhibit 10.3 to Triarc's Current Report on Form 8-K dated
          March 30, 2001 (SEC file no. 1-2207).
 10.18 -- Tax Agreement dated as of September 15, 2000, by and
          among Cadbury Schweppes plc, SBG Holdings, Inc., Triarc
          Companies, Inc. and Triarc Consumer Products Group, LLC,
          incorporated herein by reference to Exhibit 10.1 to
          Triarc's Current Report on Form 8-K dated September 20,
          2000 (SEC file no. 1-2207).
 10.19 -- Indemnity Agreement, dated as of October 25, 2000 between
          Cadbury Schweppes plc and Triarc Companies, Inc.,
          incorporated herein by reference to Exhibit 10.1 to
          Triarc's Current Report on Form 8-K dated November 8, 2000
          (SEC file no. 1-2207).
 10.20 -- Servicing Agreement, dated as of November 21, 2000, among
          Arby's Franchise Trust, as Issuer, Arby's, Inc., as
          Servicer, and BNY Midwest Trust Company, a Bank of New
          York Company, as Indenture Trustee, incorporated herein by
          reference to Exhibit 10.4 to Triarc's Current Report on
          Form 8-K dated March 30, 2001 (SEC file no. 1-2207).
 10.21 -- Promissory Note, dated April 1, 2000, issued by Nelson
          Peltz and Peter W. May to Triarc in the original principal
          amount of $5,000,000, incorporated herein by reference to
          Exhibit 10.5 to Triarc's Current Report on Form 8-K dated
          March 30, 2001 (SEC file no. 1-2207).
 10.22 -- Stipulation and Agreement of Compromise, Settlement and
          Release, dated August 17, 2000, incorporated herein by
          reference to Exhibit 10.6 to Triarc's Current Report on
          Form 8-K dated March 30, 2001 (SEC file no. 1-2207).
 10.23 -- First Amendment to the Trust Agreement for the Deferral
          Plan for Senior Executive Officers of Triarc Companies,
          Inc., dated as of April 6, 2001, between Triarc Companies,
          Inc. and Wilmington Trust Company, as trustee,
          incorporated herein by reference to Exhibit 10.1 to
          Triarc's Current Report on Form 8-K dated August 14, 2001
          (SEC file no. 1-2207).
 10.24 -- First Amendment to the Trust Agreement for the Deferral
          Plan for Senior Executive Officers of Triarc Companies,
          Inc., dated as of April 6, 2001, between Triarc Companies,
          Inc. and Wilmington Trust Company, as trustee,
          incorporated herein by reference to Exhibit 10.2 to
          Triarc's Current Report on Form 8-K dated August 14, 2001
          (SEC file no. 1-2207).
 10.25 -- Aircraft Purchase and Sale Agreement, dated June 19,
          2001, by and between Meadowlark Acquisitions, Inc. and AP
          IV Holdings, Inc., incorporated herein by reference to
          Exhibit 10.1 to Triarc's Current Report on Form 8-K dated
          March 27, 2002 (SEC file no. 1-2207).
 10.26 -- Triarc's 2002 Equity Participation Plan, as currently in
          effect, incorporated herein by reference to Exhibit A to
          Triarc's 2002 Proxy Statement (SEC file no. 1-2207).
 10.27 -- Form of Non-Incentive Stock Option Agreement under
          Triarc's 2002 Equity Participation Plan, incorporated
          herein by reference to Exhibit 10.1 to Triarc's Current
          Report on Form 8-K dated March 27, 2003 (SEC file
          no. 1-2207).
 21.1  -- Subsidiaries of the Registrant*
 23.1  -- Consent of Deloitte & Touche LLP*


                                                                              99










EXHIBIT
  NO.                           DESCRIPTION
  ---                           -----------
     
 23.2  -- Consent of Ernst & Young LLP*
 23.3  -- Consent of BDO Seidman, LLP*
 99.1  -- Consolidated Financial Statements of Encore Capital
          Group, Inc.*


- -------------------
  * Filed herewith

    Instruments defining the rights of holders of certain issues of long-term
    debt of Triarc and its consolidated subsidiaries have not been filed as
    exhibits to this Form 10-K because the authorized principal amount of any
    one of such issues does not exceed 10% of the total assets of Triarc and
    its subsidiaries on a consolidated basis. Triarc agrees to furnish a copy
    of each of such instruments to the Commission upon request.

(b) Reports on Form 8-K:

    On November 12, 2002, Triarc filed a Current Report on Form 8-K, which
    included information under Item 7 of such form.

    On November 27, 2002, Triarc filed a Current Report on Form 8-K, which
    included information under Items 5 and 7 of such form.

    On December 27, 2002, Triarc filed a Current Report on Form 8-K, which
    included information under Items 5 and 7 of such form.

(d) Separate financial statements of subsidiaries not consolidated and fifty
    percent or less owned persons:

    The consolidated financial statements of Encore Capital Group Inc.
    (formerly known as MCM Capital Group, Inc.), an investment of the Company
    accounted for in accordance with the equity method, are hereby incorporated
    by reference from Item 8. 'Consolidated Financial Statements' from the
    Annual Report on Form 10-K for the year ended December 31, 2002 of Encore
    Capital Group, Inc. (SEC file no. 000-26489). A copy of the consolidated
    financial statements incorporated by reference in this Item 14(d) is
    included as Exhibit 99.1 to this Form 10-K.

100








SIGNATURES

    Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                                          TRIARC COMPANIES, INC.
                                           (Registrant)

                                                       NELSON PELTZ
                                            ....................................
                                                       NELSON PELTZ
                                           CHAIRMAN AND CHIEF EXECUTIVE OFFICER

Dated: March 28, 2003

    Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below on March 28, 2003 by the following persons on
behalf of the registrant in the capacities indicated.



                SIGNATURE                                          TITLES
                ---------                                          ------
                                         
               NELSON PELTZ                 Chairman and Chief Executive Officer, and Director
 .........................................    (Principal Executive Officer)
              (NELSON PELTZ)

               PETER W. MAY                 President and Chief Operating Officer, and Director
 .........................................    (Principal Operating Officer)
              (PETER W. MAY)

           FRANCIS T. MCCARRON              Senior Vice President and Chief Financial Officer
 .........................................    (Principal Financial Officer)
          (FRANCIS T. MCCARRON)

             FRED H. SCHAEFER               Senior Vice President and Chief Accounting Officer
 .........................................    (Principal Accounting Officer)
            (FRED H. SCHAEFER)

              HUGH L. CAREY                 Director
 .........................................
             (HUGH L. CAREY)

               CLIVE CHAJET                 Director
 .........................................
              (CLIVE CHAJET)

             JOSEPH A. LEVATO               Director
 .........................................
            (JOSEPH A. LEVATO)

            DAVID E. SCHWAB II              Director
 .........................................
           (DAVID E. SCHWAB II)

            RAYMOND S. TROUBH               Director
 .........................................
           (RAYMOND S. TROUBH)

             GERALD TSAI, JR.               Director
 .........................................
            (GERALD TSAI, JR.)


                                                                             101










CERTIFICATIONS

    I, Nelson Peltz, the Chairman and Chief Executive Officer of Triarc
Companies, Inc., certify that:

    1. I have reviewed this annual report on Form 10-K of Triarc Companies,
Inc.;

    2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;

    3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;

    4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

        a) designed such disclosure controls and procedures to ensure that
    material information relating to the registrant, including its consolidated
    subsidiaries, is made known to us by others within those entities,
    particularly during the period in which this annual report is being
    prepared;

        b) evaluated the effectiveness of the registrant's disclosure controls
    and procedures as of a date within 90 days prior to the filing date of this
    annual report (the 'Evaluation Date'); and

        c) presented in this annual report our conclusions about the
    effectiveness of the disclosure controls and procedures based on our
    evaluation as of the Evaluation Date;

    5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit committee
of registrant's board of directors (or persons performing the equivalent
functions):

        a) all significant deficiencies in the design or operation of internal
    controls which could adversely affect the registrant's ability to record,
    process, summarize and report financial data and have identified for the
    registrant's auditors any material weaknesses in internal controls; and

        b) any fraud, whether or not material, that involves management or other
    employees who have a significant role in the registrant's internal controls;
    and

    6. The registrant's other certifying officers and I have indicated in this
annual report whether there were significant changes in internal controls or in
other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.

Date: March 28, 2003

                                                      NELSON PELTZ
                                        ........................................
                                                     NELSON PELTZ
                                         CHAIRMAN AND CHIEF EXECUTIVE OFFICER

102







CERTIFICATIONS

    I, Francis T. McCarron, the Senior Vice President and Chief Financial
Officer of Triarc Companies, Inc., certify that:

    1. I have reviewed this annual report on Form 10-K of Triarc Companies,
Inc.;

    2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;

    3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;

    4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

        a) designed such disclosure controls and procedures to ensure that
    material information relating to the registrant, including its consolidated
    subsidiaries, is made known to us by others within those entities,
    particularly during the period in which this annual report is being
    prepared;

        b) evaluated the effectiveness of the registrant's disclosure controls
    and procedures as of a date within 90 days prior to the filing date of this
    annual report (the 'Evaluation Date'); and

        c) presented in this annual report our conclusions about the
    effectiveness of the disclosure controls and procedures based on our
    evaluation as of the Evaluation Date;

    5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit committee
of registrant's board of directors (or persons performing the equivalent
functions):

        a) all significant deficiencies in the design or operation of internal
    controls which could adversely affect the registrant's ability to record,
    process, summarize and report financial data and have identified for the
    registrant's auditors any material weaknesses in internal controls; and

        b) any fraud, whether or not material, that involves management or other
    employees who have a significant role in the registrant's internal controls;
    and

    6. The registrant's other certifying officers and I have indicated in this
annual report whether there were significant changes in internal controls or in
other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.

Date: March 28, 2003

                                                  FRANCIS T. MCCARRON
                                        ........................................
                                                  FRANCIS T. MCCARRON
                                       SENIOR VICE PRESIDENT AND CHIEF FINANCIAL
                                                        OFFICER

                                                                             103



                          STATEMENT OF DIFFERENCES
                          ------------------------

The trademark symbol shall be expressed as ........................... 'TM'
The registered trademark symbol shall be expressed as ................ 'r'

EX-21

                                                                    EXHIBIT 21.1

TRIARC COMPANIES, INC.
LIST OF SUBSIDIARIES AS OF
MARCH 15, 2003



                                                              STATE OR JURISDICTION
SUBSIDIARY                                                    UNDER WHICH ORGANIZED
- ----------                                                    ---------------------
                                                           
Triarc Acquisition, LLC (formerly, Arby's Acquisition, LLC)         Delaware
    Triarc Restaurant Holdings, LLC                                 Delaware
        Arby's, Inc.                                                Delaware
            Arby's Holdings, LLC                                    Delaware
                Arby's Finance, LLC                                 Delaware
                    Arby's Franchise Trust                          Delaware
                Arby's Brands, LLC                                  Delaware
                Arby's IP Holder Trust                              Delaware
            Arby's Building and Construction Co.                     Georgia
            Arby's of Canada Inc.                                    Ontario
            ARHC, LLC                                               Delaware
        Sybra, Inc.                                                 Michigan
            Sybra of Connecticut, Inc.                             Connecticut
VA Funding Corp.                                                    Delaware
BNY Funding, LLC                                                    Delaware
Triarc Consumer Products Group, LLC                                 Delaware
    RCAC, LLC                                                       Delaware
Madison West Associates Corp.                                       Delaware
    280 BT Holdings LLC (1)                                         New York
National Propane Corporation (2)                                    Delaware
    NPC Holding Corporation                                         Delaware
Citrus Acquisition Corporation                                       Florida
    Adams Packing Association, Inc. (formerly New Adams, Inc.)      Delaware
Home Furnishing Acquisition Corporation                             Delaware
    1725 Contra Costa Property, Inc. (formerly Couroc of
      Monterey, Inc.)                                               Delaware
GVT Holdings, Inc. (3)                                              Delaware
    TXL Corp. (formerly Graniteville Company)                    South Carolina
SEPSCO, LLC                                                         Delaware
    Crystal Ice & Cold Storage, Inc.                                Delaware
Triarc Holdings 1, Inc.                                             Delaware
Triarc Holdings 2, Inc.                                             Delaware
Triarc Asset Management, LLC                                        Delaware
SYH Holdings, Inc. (formerly, Ramapo Holding Company, Inc.)         Delaware
280 Holdings, LLC                                                   Delaware
280 Holdings II, Inc.                                               Delaware
Triarc AGR Investments, LLC                                         Delaware
DSR Holdings, Inc.                                                  Delaware
280 Holding Company, Inc.                                           Delaware
TPH Holdings LLC                                                    Delaware


- ---------

(1) 57.4% owned by Madison West Associates Corp., 41.8% owned by present and
    former officers of Triarc Companies, Inc. and 0.8% owned by unaffiliated
    third parties.

(2) 24.3% owned by SEPSCO, LLC and 75.7% owned by Triarc Companies, Inc.

(3) 50% owned by Triarc Companies, Inc. and 50% owned by SEPSCO, LLC.

104

EX-23

                                                                    EXHIBIT 23.1

                         INDEPENDENT AUDITORS' CONSENT

    We consent to the incorporation by reference in Registration Statement Nos.
33-60551, 333-44711, 333-50051, 333-82069 and 333-97569 of Triarc Companies,
Inc. on Form S-8 of our report dated March 27, 2003 (which report expresses an
unqualified opinion and includes an explanatory paragraph relating to a change
in method of accounting), appearing in the Annual Report on Form 10-K of Triarc
Companies, Inc. for the fiscal year ended December 29, 2002.

DELOITTE & TOUCHE LLP

New York, New York
March 27, 2003

                                                                             105

EX-23

                                                                    EXHIBIT 23.2

                        CONSENT OF INDEPENDENT AUDITORS

    We consent to the incorporation by reference in Registration Statement Nos.
33-60551, 333-44711, 333-50051, 333-82069 and 333-97569 of Triarc Companies,
Inc. on Form S-8 and in the related Prospectuses of our report dated February 2,
2001, with respect to the consolidated financial statements of Encore Capital
Group, Inc. (formerly MCM Capital Group, Inc.) for the year ended December 31,
2000, included as Exhibit 99.1 to this Annual Report on Form 10-K for the fiscal
year ended December 29, 2002.

                                          Ernst & Young LLP

Kansas City, Missouri
March 26, 2003

106

EX-23

                                                                    EXHIBIT 23.3

                        CONSENT OF INDEPENDENT AUDITORS

    We consent to the incorporation by reference in Registration Statement Nos.
33-60551, 333-44711, 333-50051, 333-82069 and 333-97569 of Triarc Companies,
Inc. on Form S-8 of our report dated February 18, 2003, except for Note 16 as
to which the date is March 25, 2003, with respect to the consolidated financial
statements of Encore Capital Group, Inc., formerly MCM Capital Group, Inc., as
of and for each of the years ended December 31, 2001 and 2002, included at
page 1 of Exhibit 99.1 to this Annual Report on Form 10-K.

                                          /s/ BDO SEIDMAN, LLP

Orange County, California
March 26, 2003

                                                                             107

EX-99

Index

Item 8 - Consolidated Financial Statements

Encore Capital Group, Inc.

Consolidated Financial Statements

Years ended December 31, 2000, 2001 and 2002

Contents

Report of Independent Auditors, BDO Seidman, LLP	45
Report of Independent Auditors, Ernst & Young LLP	46
Audited Financial Statements
Consolidated Statements of Financial Condition	47
Consolidated Statements of Operations and Comprehensive Income (Loss)	48
Consolidated Statements of Stockholders' Equity (Deficit)	49
Consolidated Statements of Cash Flows	50
Notes to Consolidated Financial Statements	52

44

Index

Report of Independent Auditors

The Board of Directors and Stockholders
Encore Capital Group, Inc.

We have audited the accompanying consolidated statements of financial condition of Encore Capital Group, Inc., previously known as MCM Capital Group, Inc., and its subsidiaries (the “Company”) as of December 31, 2001 and 2002, and the related consolidated statements of operations and comprehensive income (loss), stockholders’ equity (deficit) and cash flows for each of the years in the two year period ended December 31, 2002. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Encore Capital Group, Inc. and its subsidiaries as of December 31, 2001 and 2002, and the consolidated results of their operations and their cash flows for each of the years in the two year period ended December 31, 2002, in conformity with accounting principles generally accepted in the United States of America.

/s/ BDO Seidman, LLP

Costa Mesa, California
February 18, 2003, except
for Note 16 as to which the
date is March 25, 2003

45

Index

Report of Independent Auditors

The Board of Directors and Stockholders
Encore Capital Group, Inc.

We have audited the accompanying consolidated statements of operations, stockholders’ equity and cash flows of Encore Captial Group, Inc., (formerly known as MCM Capital Group, Inc.) and its subsidiaries (the “Company”) for year ended December 31, 2000. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated results of operations and cash flows of Encore Capital Group, Inc. and its subsidiaries for the year ended December 31, 2000, in conformity with accounting principles generally accepted in the United States.

/s/ Ernst & Young LLP

Kansas City, Missouri
February 2, 2001

46

Index

Encore Capital Group, Inc.

Consolidated Statements of Financial Condition
(In Thousands, Except Par Value Amounts)

	December 31
	2001	2002
Assets
Cash	$      1,412	$   752
Restricted cash (Note 1)	3,053	3,105
Investment in receivable portfolios, net (Notes 4 and 5)	47,001	64,168
Retained interest in securitized receivables (Note 5)	17,926	8,256
Property and equipment, net (Note 6)	5,244	3,541
Deferred tax assets, net (Note 8)	–	6,813
Other assets	3,075	3,339
Total assets	$ 77,711	$ 89,974
Liabilities and stockholders' equity (deficit)
Accounts payable and accrued liabilities (Notes 7)	$   7,240	$  10,688
Accrued profit sharing arrangement (Notes 7)	2,378	11,180
Income tax payable (Notes 8)	–	531
Notes payable and other borrowings (Note 7)	69,215	47,689
Capital lease obligations (Note 9)	1,236	344
Total liabilities	80,069	70,432
Commitments and contingencies (Notes 9, 11, 14 and 16)
Stockholders' equity (deficit) (Notes 2, 5, 10, 12, and 13):
Preferred stock, $.01 par value, 5,000 shares authorized, zero
shares and 1,000 shares issued and outstanding at
December 31, 2001 and December 31, 2002 respectively
(Liquidation value of $16,000 at December 31, 2002)	–	10
Common stock, $.01 par value, 50,000 shares authorized, and
7,161 shares issued and 7,411 shares issued and outstanding at
December 31, 2001 and December 31, 2002, respectively	72	74
Additional paid-in capital	22,111	31,479
Accumulated deficit	(25,737)	(12,388)
Accumulated other comprehensive income	1,196	367
Total stockholders' equity (deficit)	(2,358)	19,542
Total liabilities and stockholders' equity (deficit)	$  77,711	$  89,974

See accompanying notes to consolidated financial statements.

47

Index

Encore Capital Group, Inc.

Consolidated Statements of Operations and Comprehensive Income (Loss)
(In Thousands, Except Per Share Amounts)

	Years ended December 31,
	2000			2001			2002
Revenues:
Income from receivable portfolios	$	15,434		$	32,581		$	80,961
Income from retained interest		11,679			9,806			5,707
Servicing fees and other related income		9,447			5,458			3,712
Total revenues		36,560			47,845			90,380
Operating expenses:
Salaries and employee benefits		23,423			27,428			35,137
Other operating expenses		6,211			5,708			7,934
Collection legal costs		129			5,457			11,028
General and administrative expense		5,458			5,750			6,314
Restructuring charges (Note 3)		1,388			–			–
Provision for portfolio losses (Note 4)		20,886			–			1,049
Depreciation and amortization (Note 6)		2,154			2,481			2,453
Total operating expenses		59,649			46,824			63,915
Income (loss) before other income (expense)
and income taxes		(23,089	)		1,021			26,465
Other income (expense):
Interest expense (Notes 7 and 9)		(7,829	)		(10,945	)		(18,592	)
Other income (expense)		(69	)		208			213
Total other expense		(7,898	)		(10,737	)		(18,379	)
Income (loss) before income taxes		(30,987	)		(9,716	)		8,086
Provision for (benefit from) income
taxes (Note 8)		(7,257	)		1,149			(5,703	)
Net Income (loss)		(23,730	)		(10,865	)		13,789
Other comprehensive income (loss):
Increase in unrealized gain on non-qualified
deferred compensation plan assets		–			–			39
Decrease in unrealized gain on retained
interest in securitized receivables, net of
tax		(1,400	)		(1,725	)		(868	)
Comprehensive income (loss)	$	(25,130	)	$	(12,590	)	$	12,960
Earnings (loss) per share - Basic (Note 13)	$	(3.20	)	$	(1.52	)	$	1.82
Earnings (loss) per share - Diluted (Note 13)	$	(3.20	)	$	(1.52	)	$	0.84
Shares used for computation (in thousands):
Basic (Note 13)		7,421			7,161			7,339
Diluted (Note 13)		7,421			7,161			16,459

See accompanying notes to consolidated financial statements.

48

Index

Encore Capital Group, Inc.

Consolidated Statements of Stockholders' Equity (Deficit)
(In Thousands)

													Retained			Accumulated
	Common Stock			Treasury		Stock	Preferred		Stock	Additional			Earnings			Other
										Paid-In		(Accumulated				Comprehensive
	Shares		Par	Shares		Cost	Shares		Cost	Capital			Deficit)			Income			Total
Balance at December 31, 1999	7,191		$72	–	$	–	–	$	–	$	19,777		$	8,858		$	4,321		$	33,028
Net loss	–		–	–		–	–		–		–			(23,730	)		–			(23,730	)
Other comprehensive loss - unrealized
loss (Note 5)	–		–	–		–	–		–		–			–			(1,400	)		(1,400	)
Issuance of common stock warrants
(Note 10)	–		–	–		–	–		–		1,634			–			–			1,634
Treasury Stock	–		–	430		(128)	–		–		–			–			–			(128	)
Issuance of common stock (Note 3)	400		4	–		–	–		–		671			–			–			675
Balance at December 31, 2000	7,591		76	430		(128)	–		–		22,082			(14,872	)		2,921			10,079
Net loss	–		–	–		–	–		–		–			(10,865	)		–			(10,865	)
Other comprehensive loss - unrealized
loss (Note 5)	–		–	–		–	–		–		–			–			(1,725	)		(1,725	)
Issuance of common stock warrants
(Note 10)	–		–	–		–	–		–		153			–			–			153
Treasury stock cancellation	(430)		(4)	(430)		128	–		–		(124	)		–			–			–
Balance at December 31, 2001	7,161		72	–		–	–		–		22,111			(25,737	)		1,196			(2,358	)
Net Income	–		–	–		–	–		–		–			13,789			–			13,789
Other comprehensive loss - unrealized
loss (Note 5)	–		–	–		–	–		–		–			–			(829	)		(829	)
Net proceeds from issuance of
Preferred Stock (Note 2)	–		–	–		–	1,000		10		4,578			–			–			4,588
Preferred dividends			–	–		–	–		–		–			(440	)		–			(440	)
Forgiveness of debt, net (Note 2)	–		–	–		–	–		–		4,665			–			–			4,665
Issuance of common stock warrants
(Note 10)	–		–	–		–	–		–		125			–			–			125
Exercise of common stock warrants
(Note 10)	250		2	–		–	–		–		–			–			–			2
Balance at December 31, 2002	7,411	$	74	–		$–	1,000		$10	$	31,479		$	(12,388	)	$	367		$	19,542

See accompanying notes to consolidated financial statements.

49

Index

Encore Capital Group, Inc.

Consolidated Statements of Cash Flows
(In Thousands)

	Years ended December 31,
	2000			2001			2002
Operating activities
Gross Collections	$	66,117		$	83,051		$	148,808
Less:
Amounts collected on behalf of third parties		(29,083	)		(12,963	)		(10,494	)
Amounts applied to principal on receivable
portfolios		(15,918	)		(16,398	)		(43,423	)
Amounts applied to principal of securitization 98-1		–			–			(7,808	)
Servicing fees		8,017			5,398			3,712
Operating Expenses
Salaries and employee benefits		(22,649	)		(27,315	)		(32,909	)
Other operating expenses		(10,841	)		(6,096	)		(7,228	)
Collection legal costs		(129	)		(5,457	)		(11,028	)
General and administrative		(5,380	)		(6,162	)		(6,707	)
Restructuring charges		(1,388	)		–			–
Interest payments		(5,207	)		(4,817	)		(8,392	)
Other income and expense		159			197			211
(Increase) decrease in restricted cash		471			(585	)		(52	)
Net cash provided by (used in) operating activities		(15,831	)		8,853			24,690
Investing activities
Purchases of receivable portfolios		(4,433	)		(39,030	)		(62,525	)
Collections applied to principal of receivable portfolios		15,918			16,398			43,423
Collections applied to principal of securitization 98-1		–			–			7,808
Proceeds from put-backs of receivable portfolios		706			1,150			882
Cash acquired in acquisition of assets from West Capital		10			–			–
Proceeds from the sale of property and equipment		984			137			3
Purchases of property and equipment		(786	)		(428	)		(749	)
Net cash provided by (used in) investing activities		12,399			(21,773	)		(11,158	)
Financing activities
Proceeds from notes payable and other borrowings		66,361			28,936			62,183
Repayment of notes payable and other borrowings		(59,607	)		(14,440	)		(79,669	)
Capitalized loan costs relating to financing arrangement		(1,893	)		(55	)		(154	)
Proceeds from exercise of common stock warrants		–			–			2
Proceeds from sale of preferred stock		–			–			4,588
Payment of preferred dividend		–			–			(250	)
Purchase of treasury stock		(128	)		–			–
Repayment of capital lease obligations		(765	)		(997	)		(892	)
Net cash provided by (used in) financing activities		3,968			13,444			(14,192	)
Net increase (decrease) in cash		536			524			(660	)
Cash, beginning of year		352			888			1,412
Cash, end of year	$	888		$	1,412		$	752

See accompanying notes to consolidated financial statements.

50

Encore Capital Group, Inc.

Consolidated Statements of Cash Flows (continued)

Reconciliation of Net Income (Loss) to Net Cash Provided by (Used in) Operating Activities
(In Thousands)

	Years ended December 31
	2000		2001		2002
Net income (loss)	$	(23,730)	$	(10,865)	$	13,789
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization		2,154		2,481		2,452
Amortization of loan costs		1,145		1,457		661
Amortization of debt discount		94		146		112
(Gain) loss on sales of property and equipment		227		(11)		–
Deferred income tax expense (benefit)		(6,839)		1,149		(6,234)
Increase (decrease) in income on retained interest		(3,394)		10,816		414
Increase in income on receivable portfolios		–		450		–
Amortization of servicing liability		(1,430)		–		–
Write-off of basis of settled portfolios		427		–		–
Provision for portfolio losses		20,886		–		1,049
Changes in operating assets and liabilities
(Increase) decrease in service fee receivable		379		–		–
(Increase) decrease in restricted cash		471		(585)		(52)
(Increase) decrease in other assets		24		(1,593)		(783)
Note payable issued in lieu of interest payment		613		1,308		–
Settlement of amount payable under receivable
purchase contract		(2,323)		–		–
Increase (decrease) in accounts payable and
accrued liabilities		(4,535)		4,100		13,282
Net cash provided by (used in) operating activities	$	(15,831)	$	8,853	$	24,690
Supplemental schedules of non-cash investing activities:
Property and equipment acquired under capital leases	$	1,737	$	–	$	–
Supplemental schedules of non-cash financing activities:
Issuance of common stock warrants in connection with
debt agreements	$	1,634	$	153	$	125
Recordation of equity in connection with debt forgiveness	$	–	$	–	$	4,665
Issuance of common stock in connection with the
Acquisition of certain assets of West Capital
Fair value of assets acquired	$	2,419	$	–	$	–
Fair value of liabilities assumed		(1,744)		–		–
Common stock issued	$	675	$	–	$	–

See accompanying notes to consolidated financial statements.

51

Index

1. Significant Accounting Policies

Ownership and Description of Business
Encore Capital Group, Inc. (“Encore” or the “Company”), previously known as MCM Capital Group, Inc., is a financial services company specializing in the purchase, collection, restructuring, resale and securitization of receivable portfolios acquired at deep discounts. The Company is a Delaware holding company whose principal assets are its investments in its wholly-owned subsidiaries, Midland Credit Management, Inc. (“Midland Credit”), Midland Funding 98-A Corporation, Midland Receivables 99-1 Corporation, Midland Acquisition Corporation, and MRC Receivables Corporation (“MRC”) (collectively referred to herein as the “Company”). Encore also has a wholly-owned subsidiary, Midland Receivables 98-1 Corporation, which is not consolidated (Note 5). The receivable portfolios consist primarily of charged-off domestic consumer credit card receivables purchased from national financial institutions, major retail credit corporations, and resellers of such portfolios. Acquisitions of receivable portfolios are financed by operations and by borrowings from third parties (Note 7).

Liquidity
The Company incurred net losses totaling $23.7 and $10.9 million for the years ended December 31, 2000 and 2001, respectively. The Company also had a stockholders’ deficit totaling $2.4 million at December 31, 2001. For the twelve months ended December 31, 2002, the Company realized net income of $13.8 million, which included the restoration of a net deferred tax asset in the amount of $6.8 million (Note 8), and, after taking into consideration the forgiveness of certain debt and the issuance of new equity occurring during the first quarter, stockholders’ equity increased to $19.5 million at December 31, 2002. The Company complied with all debt covenants with the exception of the maximum debt balance covenants relating to its Warehouse Facility and Securitization 99-1 financings (see Note 5). The Company experienced positive cash flows from operations during 2001 and 2002, and achieved positive net income during all four quarters of 2002. The Company believes that there is sufficient liquidity, given its expectation of positive cash flows from operations, the transactions that occurred in February of 2002 (see Note 2), the availability under the Revolving Line of Credit (see Note 7) and Secured Financing Facility (see Note 7), to fund operations for at least the next 12 months. However, there can be no assurances that the Company will successfully sustain profitable operations, continue to generate positive cash flow from operations, and satisfy its covenants relating to debt financings.

Restricted Cash
Restricted cash represents cash reserve accounts pledged to the Warehouse Securitization and Securitization 99-1, and undistributed collections held on behalf of trustees and principals (see Notes 5 and 14).

52

Investment in Receivable Portfolios
The Company accounts for its investment in receivable portfolios on the “accrual basis” or “cost recovery method” of accounting in accordance with the provisions of the AICPA’s Practice Bulletin 6, “Amortization of Discounts on Certain Acquired Loans”. Static pools are established with accounts having similar attributes, based on the specific seller and timing of acquisition. Once a static pool is established, the receivables are permanently assigned to the pool. The discount (i.e., the difference between the cost of each static pool and the related aggregate contractual receivable balance) is not recorded because the Company expects to collect a relatively small percentage of each static pool’s contractual receivable balance. As a result, receivable portfolios are recorded at cost at the time of acquisition.

The Company accounts for each static pool as a unit for the economic life of the pool (similar to one loan) for recognition of income from receivable portfolios, for collections applied to principal of receivable portfolios and for provision for loss or impairment. Income from receivable portfolios is accrued based on the effective interest rate determined for each pool applied to each pool’s original cost basis, adjusted for accrued income and principal paydowns. The effective interest rate is the internal rate of return determined based on the timing and amounts of actual cash received and anticipated future cash flow projections for each pool.

The Company monitors impairment of receivable portfolios based on total projected future cash flows of each portfolio compared to each portfolio’s carrying value. The receivable portfolios are evaluated for impairment periodically by management based on current market and cash flow assumptions. Provisions for losses are charged to earnings when it is determined that the investment in a receivable portfolio is greater than the estimate of total probable future collections. Additionally, if the amount and timing of future collections are not reasonably estimable, the Company accounts for those portfolios on the cost recovery method. The Company recorded impairment charges of approximately $20.9 million and $1.0 million against the carrying value of the portfolios in 2000 and 2002, respectively (see Note 4). No provision for losses was recorded during the year ended December 31, 2001.

Securitization Accounting
In September 2000, the FASB issued SFAS No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities,” that replaces, in its entirety, SFAS No. 125. The accounting treatment prescribed by this pronouncement was effective for fiscal years ending after December 15, 2000 for disclosure purposes. The adoption of this pronouncement did not have a significant impact on the Company’s consolidated financial statements.

53

Retained Interest in Securitized Receivables
In 2000, the Company’s investment in retained interest in securitized receivables was treated as a debt security similar to an available-for-sale security and was carried at fair value. At the time of securitization, the retained interest was initially recorded at the basis allocated in accordance with SFAS No. 125. This original cost basis was adjusted to fair value, which was based on the discounted anticipated future cash flows on a “cash out” basis, with such adjustment (net of related deferred income taxes) recorded as a component of other comprehensive income. The cash out method was used to project cash collections to be received only after all amounts owed to investors had been remitted.

Income on the retained interest was accrued based on the effective interest rate applied to its original cost basis, adjusted for accrued interest and principal paydowns. The effective interest rate was the internal rate of return determined based on the timing and amounts of actual cash received and anticipated future cash flow projections for the underlying pool of securitized receivables.

In January 2001, the Emerging Issues Task Force reached a consensus on EITF 99-20, “Recognition of Interest Income and Impairment on Purchased and Retained Beneficial Interests in Securitized Financial Assets.” EITF 99-20 requires companies to account for all changes in forecasted revenues for retained beneficial interests prospectively through a change in the effective interest rate. The Company adopted EITF 99-20 on its effective date, April 1, 2001. Pursuant to EITF 99-20, the retained interest is carried at cost, increased by interest accretion based on estimated future cash receipts and decreased by actual cash collections. The retained interest is estimated to yield a monthly return based on estimated net cash flows derived from historical cash flows. The unrealized gain reflected as a component of stockholders’ equity net of tax is recognized in income utilizing the effective interest method (See Note 5).

The Company monitors impairment of the retained interest based on discounted anticipated future cash flows of the underlying receivables compared to the original cost basis of the retained interest, adjusted for unpaid accrued interest and principal paydowns. The discount rate is based on a rate of return, adjusted for specific risk factors, that would be expected by an unrelated investor in a similar stream of cash flows. The retained interest is evaluated for impairment by management quarterly based on current market and cash flow assumptions applied to the underlying receivables. Provisions for losses are charged to earnings when it is determined that the retained interest’s original cost basis, adjusted for unpaid accrued interest and principal paydowns, is greater than the present value of expected future cash flows. No provision for impairments on the retained interest were recorded in 2000, 2001 or 2002.

The retained interest is held by Midland Credit and the related receivable portfolios are held by a wholly-owned, bankruptcy remote, special purpose subsidiary of the Company, Midland Receivables 98-1 Corporation. As a result, the value of the retained interest, and its associated cash flows, would not be available to satisfy claims of general creditors of the Company.

54

Property and Equipment
Property and equipment are recorded at cost, less accumulated depreciation and amortization. The provision for depreciation and amortization is computed using the straight-line or an accelerated method over the estimated useful lives of the assets as follows:

Leasehold improvements	Lesser of lease term or useful life
Furniture and fixtures	5 to 7 years
Computer hardware and software	3 to 5 years
Vehicles	5 years

Maintenance and repairs are charged to expense in the year incurred. Expenditures for major renewals that extend the useful lives of fixed assets are capitalized and depreciated over the useful lives of such assets.

Long-Lived Assets
The Company reviews the carrying amount of its long-lived assets and identifiable intangible assets for possible impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets.

Income Taxes
The Company uses the liability method of accounting for income taxes in accordance with Statement of Financial Accounting Standards No. 109, “Accounting for Income Taxes.” Deferred income taxes are recognized based on the differences between financial statement and income tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized. The provision for income taxes represents the tax payable for the period and the change during the period in deferred tax assets and liabilities (see Note 8).

Stock-Based Compensation
The Company has elected to follow Accounting Principles Board Opinion No. 25 (APB 25), Accounting for Stock Issued to Employees, and related interpretations in accounting for its employee stock options rather than the alternative fair value accounting provided for under SFAS No. 123, Accounting and Disclosure for Stock-Based Compensation. In accordance with APB 25, compensation cost relating to stock options granted by the Company is measured as the excess, if any, of the market price of the Company’s stock at the date of grant over the exercise price of the stock options (see Note 12).

55

Fair Values of Financial Instruments
The following methods and assumptions were used by the Company to estimate the fair value of each class of financial instruments:

Investment in receivable portfolios: The fair value is estimated based on recent acquisitions of similar receivable portfolios or discounted expected future cash flows in those cases where the amounts and timing of projected future cash flows are determined to be reasonably estimable. The discount rate is based on a rate of return, adjusted for specific risk factors, that would be expected by an unrelated investor in a similar stream of cash flows. The fair value of the Company’s investments in receivable portfolios is estimated to be $49.4 million and $79.6 million versus a carrying value of $47.0 million and $64.2 million at December 31, 2001 and 2002, respectively.

Retained interest in securitized receivables: Fair value is estimated by discounting anticipated future cash flows using a discount rate based on specific risk factors. The fair value of the Company’s investment in retained interest in securitized receivables is estimated to be $19.0 million and $9.4 million versus a carrying value of $17.9 million and $8.3 million at December 31, 2001 and 2002, respectively.

Notes payable and other borrowings: The carrying amount reported in the consolidated statements of financial condition approximates fair value for notes payable that are of a short-term nature. For other borrowings, fair value is estimated by discounting anticipated future cash flows using market rates of debt instruments with similar terms and remaining maturities. The carrying amount of other borrowings approximates fair value.

Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could materially differ from those estimates.

Significant estimates have been made by management with respect to the timing and amount of collection of future cash flows from receivable portfolios owned and those underlying the Company’s retained interest. Significant estimates have also been made with respect to the Company’s contingent interest obligation (see Note 7) and the realizability of the Company’s net deferred tax assets (see Note 8). Actual results are likely to materially differ from these estimates, making it reasonably possible that a material change in these estimates could occur within one year.

56

Concentrations of Risk
Financial instruments, which potentially expose the Company to concentrations of credit risk, consist primarily of cash. The Company places its cash with high quality financial institutions. At times, cash balances may be in excess of the amounts insured by the Federal Deposit Insurance Corporation.

Earnings and Loss Per Share
Earnings and Loss per share are calculated pursuant to Statement of Financial Accounting Standards No. 128, “Earnings Per Share.” For the years ended December 31, 2000 and 2001, basic and diluted loss per share include no dilution and are computed by dividing loss available to common shareholders by the weighted average number of shares outstanding during the period. Potential common shares excluded from the computation of loss per share totaled 2,450,000 and 2,441,000 for years ended December 31, 2000 and 2001. For the year ended December 31, 2002, diluted earnings per share is computed giving effect to all dilutive potential common shares that were outstanding during the year. Dilutive potential common shares consist of incremental shares issuable upon exercise of stock options and warrants and conversion of outstanding preferred stock.

Reclassifications
Certain prior years amounts have been reclassified to conform to the current year presentation.

New Accounting Pronouncements
In March 2000, the FASB issued Interpretation No. 44 (“FIN 44”), “Accounting for Certain Transactions involving Stock Compensation.” The adoption of FIN 44 did not have a material impact on the consolidated results of operations or financial position of the Company.

In June 2001, the FASB issued SFAS No. 141, “Business Combinations,” which eliminates the pooling method of accounting for business combinations initiated after June 30, 2001. In addition, SFAS No. 141 addresses the accounting for intangible assets and goodwill acquired in a business combination. This portion of SFAS No. 141 is effective for business combinations completed after June 30, 2001. The Company’s adoption of SFAS No. 141 did not have a material impact on the Company’s consolidated financial position or results of operations.

In June 2001, the FASB issued SFAS No. 142, “Goodwill and Intangible Assets,” which revised the accounting for purchased goodwill and intangible assets. Under SFAS No. 142, goodwill and intangible assets with indefinite lives will no longer be amortized and will be tested for impairment annually. SFAS No. 142 is effective for fiscal years beginning after December 15, 2001, with earlier adoption permitted. The Company’s adoption of SFAS No. 142 did not have a material impact on the Company’s consolidated financial position or results of operations.

57

In June 2001, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 143, “Accounting for Asset Retirement Obligations”, which requires that the fair value of a liability for an asset retirement obligation be recognized in the period in which it is incurred with the associated asset retirement costs being capitalized as a part of the carrying amount of the long-lived asset. SFAS No. 143 also includes disclosure requirements that provide a description of asset retirement obligations and reconciliation of changes in the components of those obligations. The statement is effective for fiscal years beginning after June 15, 2002. The Company does not expect the adoption of SFAS No. 143 to have a material effect on the Company’s consolidated financial position or results of operations.

In August 2001, the FASB issued SFAS No. 144, “Impairment or Disposal of Long-Lived Assets,” which addresses accounting and financial reporting for the impairment or disposal of long-lived assets. This standard was effective for the Company’s consolidated financial statements beginning January 1, 2002. The implementation of SFAS No. 144 did not have a material impact on the Company’s consolidated financial position or results of operations.

In April 2002, the FASB issued SFAS No. 145, “Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections.” SFAS No. 145 rescinded three previously issued statements and amended SFAS No. 13, “Accounting for Leases.” The statement provides reporting standards for debt extinguishments and provides accounting standards for certain lease modifications that have economic effects similar to sale-leaseback transactions. The statement is effective for certain lease transactions occurring after May 15, 2002 and all other provisions of the statement shall be effective for financial statements issued on or after May 15, 2002. The implementation of SFAS No. 145 did not have a material impact on the Company’s consolidated financial position or results of operations.

In June 2002, the FASB issued SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities,” which updates accounting and reporting standards for personnel and operational restructurings. The Company will be required to adopt SFAS No. 146 for exit, disposal or other restructuring activities that are initiated after December 31, 2002, with early application encouraged. The Company does not expect the adoption of SFAS No. 146 to have a material effect on the Company’s consolidated financial position or results of operations.

In November 2002, the FASB issued Interpretation No. 45 (“FIN 45”), “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others.” The adoption of FIN 45 did not have a material impact on the consolidated finacial statements of the Company.

In December 2002, the FASB issued SFAS No. 148, “Accounting for Stock-Based Compensation - Transition and Disclosure - an Amendment to SFAS No. 123.”SFAS No. 148 provides alternative methods of transition for a voluntary change to the fair value based method on accounting for stock-based employee compensation. The Company currently does not intend to adopt SFAS No. 123 and accordingly does not expect the implementation of SFAS No. 148 to have a material effect on the Company's consolidated financial position or results of operations.

58

In January 2003, the FASB issued Interpretation No. 46 (“FIN 46”), “Consolidation of Variable Interest Entities.” The adoption of FIN 46 did not have a material impact on the consolidated financial statements of the Company.

2.   Sale of Preferred Stock and Debt Forgiveness

On February 22, 2002, certain existing stockholders and their affiliates (the “Purchasers”) made an additional $5.0 million investment in Encore Capital Group, Inc. Immediately prior to such investment, the Purchasers beneficially owned in excess of 50% of the Company’s common stock on a collective basis. In a related transaction, one of the Company’s principal lenders, ING Capital LLC (“ING”), forgave $5.3 million of outstanding debt and reduced its warrant position by 200,000 warrants. The debt forgiveness was recorded net of the debt discount related to the warrants cancelled and deferred loan costs totaling $0.7 million in the aggregate. The effect of the debt forgiveness was recorded by the Company as a capital contribution since it was facilitated by various equity holders of the Company through their relationship with the lender resulting from prior investment banking and financial advisory services rendered to such equity holders by the lender and its affiliates. These two transactions increased the Company’s net worth by $9.3 million.

The Purchasers received 1,000,000 shares of the Company’s Series A Senior Cumulative Participating Convertible Preferred Stock (the “Series A Preferred Stock”) at a price of $5.00 per share for $5.0 million in cash less $0.4 million of costs associated with the issuance. Each share of Series A Preferred Stock is convertible at the option of the holder, at any time, into 10 shares of common stock at a conversion price of $0.50 per share of common stock, subject to customary anti-dilution adjustments. The Series A Preferred Stock has a cumulative dividend, payable semi-annually. Until February 15, 2004, dividends are payable in cash and/or additional Series A Preferred Stock, at the Company’s option, at the rate of 10.0% per annum. Thereafter, dividends will be payable only in cash, at a rate of 10.0% per annum. The dividend payable on August 15, 2002 and February 15, 2003 were paid in cash. The dividend rate increases to 15.0% per annum in the event of a qualified public offering, a change of control (each as defined) or the sale of all or substantially all of the assets of the Company. In the event dividends are not declared or paid, the dividends will accumulate on a compounded basis. The Series A Preferred Stock has a liquidation preference equal to the sum of the stated value of the Series A Preferred Stock ($5.0 million in the aggregate) plus all accrued and unpaid dividends thereon and a participation payment equal to shares of common stock at the conversion price and/or such other consideration that would be payable to holders of the Series A Preferred Stock if their shares had been converted into shares of the Company’s common stock immediately prior to the liquidation event.

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The Series A Preferred Stock ranks senior to the common stock and any other junior securities with respect to the payment of dividends and liquidating distributions. The Company is prohibited from issuing any capital stock that ranks senior to the Series A Preferred Stock without the consent of the holders of a majority of the outstanding shares of Series A Preferred Stock.

Upon the occurrence of a qualified public offering, a change in control, or a sale of the Company, the Company may, by decision of the then independent members of the Board of Directors, redeem the outstanding Series A Preferred Stock in whole, but not in part, at an aggregate redemption price equal to the $5.0 million liquidation preference, plus dividends, as described above, plus the participation payment.

The holders of the Series A Preferred Stock are entitled to vote on an as converted basis with the holders of the common stock as a single class and have the right to vote as a class on certain specified matters. In the event that the Company fails to pay dividends for either two consecutive semi-annual periods or any four semi-annual periods, the Purchasers are entitled to designate two directors to serve on the Company’s Board of Directors for as long as at least 10% of the shares of the Series A Preferred Stock remain outstanding. The holders of the Series A Preferred Stock also have been granted registration rights in respect of the common stock underlying the Series A Preferred Stock.

The investment by the Purchasers was approved by the Company’s board of directors, following the recommendation of a special committee consisting of the Company’s independent director formed specifically for the purpose of evaluating and considering the transaction. The special committee was advised by an independent financial advisor and by independent legal counsel.

3.   Acquisition of Certain Assets of West Capital Financial Services Corp. & Restructuring Charges

On May 22, 2000, Midland Acquisition Corporation (“MAC”), a Delaware corporation and a wholly-owned subsidiary of the Company, completed the acquisition of certain operating assets and the assumption of certain operating liabilities of WCFSC, Inc., formerly known as West Capital Financial Services Corp. (“West Capital”), a California corporation, pursuant to an Asset Purchase Agreement (the “Purchase Agreement”). West Capital was a majority owned subsidiary of SunAmerica, Inc. The aggregate consideration paid by the Company to West Capital for such net assets acquired was 375,000 shares of Encore common stock valued at approximately $0.6 million as of May 22, 2000 based on a closing price of $1.6875 per share.

The assets acquired include three portfolios of charged-off credit card receivables, all of the fixed assets of West Capital, and certain agreements and licenses used by West Capital in the operation of its business. Various assets that were acquired pursuant to the Purchase Agreement were used as part of West Capital’s business of collecting charged-off credit card receivables, including computer hardware and software, telephone equipment, and other related equipment. MAC licensed the assets to Midland Credit which has continued to use those assets in similar operations. As part of the transaction, all of the previous employees of West Capital were offered and accepted employment by Midland Credit.

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In a separate but related transaction, the Company acquired certain charged-off credit card receivables from a trust formed by WCFSC Special Purpose Corporation (“WCFSC SPC”), a California corporation and wholly-owned subsidiary of West Capital, pursuant to a trust receivables purchase agreement, dated May 22, 2000, by and among Encore, West Capital, WCFSC SPC, WCFSC Special Purpose Corporation II, and Norwest Bank Minnesota, National Association, as trustee for WCFSC Consumer Receivables Recovery Trust 1995-1. The consideration for the acquisition consisted of 25,000 shares of Encore’s common stock with a value of approximately $42,000 based on a closing price of $1.6875 per share on May 22, 2000. In December 2000, the Company repurchased the 400,000 shares from SunAmerica for $0.1 million.

On the acquisition date, Midland Credit also became the successor servicer to a pool of charged-off consumer accounts that were owned by West Capital Receivables Corporation I, a California corporation and wholly owned, bankruptcy-remote subsidiary of West Capital. Under the terms of the servicing contract, Midland Credit earns a servicing fee for collections of these receivables (see Note 14).

In conjunction with the West Capital transaction, certain former officers of West Capital replaced certain officers of the Company, which resulted in severance charges of approximately $0.9 million recorded during 2000. Additionally, the Company closed its operations center in Hutchinson, Kansas in June 2000. The closure resulted in additional severance charges of approximately $0.2 million for 93 employees terminated. The Company also recorded a loss of approximately $0.3 million pertaining to the disposition of the Hutchinson facility. The entire reserve was utilized in the third quarter of 2000.

4.   Investment in Receivable Portfolios

In 2000, the Company determined that twenty-two of its receivable portfolios acquired during 1999 and 2000 were impaired and recorded related impairment charges of $20.9 million against the carrying value of those portfolios. Effective July 1, 2001, all portfolios that were previously impaired and that still had carrying values were returned to accrual status. Effective October 1, 2001, one of the portfolios returned to accrual status retroactive to July 1, 2001 and an additional seven portfolios, with carrying values aggregating $1.5 million at December 31, 2001, were changed to the cost recovery method as the Company deemed the pattern of collections to be unpredictable, making it not feasible to reasonably estimate the amount and timing of future collections. Effective June 2002, one portfolio and effective December 2002, another portfolio were changed to the cost recovery method for the same reasons discussed above. For the year ended December 31, 2002, $2.7 million of income was recognized for those portfolios returned to accrual status.

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In 2002, the Company determined that three of its receivable portfolios acquired during 1999 and 2000 were impaired and recorded related impairment charges of $1.0 million against the carrying value of these portfolios.

For those portfolios on non-accrual status, when collections exceed the remaining net book value of the related individual portfolios, such excess collections are recorded as income. During the years ended December 31, 2000, 2001 and 2002, approximately $3.7 million, $5.3 million and $4.3 million, respectively, was recognized as income pertaining to collections on portfolios on which the related net book value has been fully recovered.

During 2002, the Company initiated whole portfolio sales. The net gain from this initiative totaled $0.7 million, which is reflected in Income from Receivable Portfolios.

The following table summarizes the changes in the balance of the investment in receivable portfolios during the following periods (in thousands):

	2000		2001		2002
Balance, beginning of year	$	57,473	$	25,969	$	47,001
Purchase of receivable portfolios		4,433		39,030		62,525
Receivable portfolios acquired in the
West Capital transaction		2,000		–		–
Write-off of basis of settled portfolios		(427)		–		–
Provision for portfolio losses		(20,886)		–		(1,049)
Collections applied to receivable
portfolios		(28,375)		(45,305)		(120,352)
Revenue accreted on receivable portfolios		11,751		27,307		76,043
Balance, end of year	$	25,969	$	47,001	$	64,168

The Company currently utilizes various business channels for the collection of charged off credit cards and other receivables. During 2001 and 2002, the Company began purchasing charged off unsecured consumer loans and auto loan deficiencies. The Company purchased $0.4 million and $1.5 million in unsecured consumer loans in 2001 and 2002, respectively. Collections related to the unsecured consumer loans amounted to $0.1 million in 2001 and $2.9 million in 2002. The Company also purchased $0.4 million in auto loan deficiencies in December of 2002.

The following table summarizes the collections by collection channel (in thousands):

	2000		2001		2002
Collection Sites	$	61,546	$	64,160	$	94,997
Legal collections		2,655		16,325		27,620
Sales		1,916		1,768		18,545
Other		–		798		7,646
Total collections for the year	$	66,117	$	83,051	$	148,808

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5.   Securitization of Receivable Portfolios

1998 Securitization/Sale
On December 30, 1998, Midland Receivables 98-1 Corporation, a bankruptcy-remote, special-purpose subsidiary of Midland Credit, issued non-recourse notes in the principal amount of $33 million, which had a fixed interest rate of 8.63%. These notes were repaid in full on September 11, 2000. The 1998 Securitization was accounted for as a sale under the provisions of SFAS No. 125 “Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities”. Accordingly, the Company recorded a retained interest and a servicing liability, and recognized a gain of approximately $9.3 million in 1998.

In connection with the securitization, the Company received a servicing fee equal to 20% of the gross monthly collections of the securitized credit card receivables through September 11, 2000, the date of repayment of the notes. During 2000, the Company recorded servicing fees of $3.7 million. At the time of the transaction, the benefits of servicing the securitized receivables were not expected to adequately compensate the Company for the servicing arrangement; therefore, the Company recorded a servicing liability of $3.6 million. The Company recorded amortization of $1.4 million related to the servicing liability during 2000. In conjunction with the repayment of the note payable, the servicing liability was fully amortized in September 2000.

As a result of the securitization transaction, the Company recorded a retained interest in securitized receivables. The retained interest was collateralized by the credit card receivables that were securitized, adjusted for amounts owed to the note holders. At the time of the transaction, the Company recorded the retained interest at an allocated basis in the amount of $15.8 million based on its relative fair value, as discussed in Note 1. The allocated basis was then adjusted to its fair market value with the difference resulting in an unrealized gain, net of deferred income taxes, recorded as other comprehensive income within the accompanying consolidated statements of stockholders’ equity. The deferred income taxes associated with the unrealized gain were $0.8 million and $0.2 million as of December 31, 2001 and 2002, respectively.

The retained interest was originally recorded at fair value, with the difference between fair value and cost basis recorded as unrealized gain and included in accumulated other comprehensive income as a component of stockholders’ equity. Pursuant to EITF 99-20, the retained interest is carried at cost, increased by interest accretion based on estimated future cash receipts and decreased by actual cash collections. The retained interest is estimated to yield an annual return of approximately 44% based on estimated net cash flows derived from both historical and projected collections. The income accrued on the retained interest was $11.7 million, $9.8 million and $5.7 million for the years ended December 31, 2000, 2001 and 2002, respectively.

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Once each quarter, the Company monitors the retained interest for impairment based on discounted anticipated future cash flows of the underlying receivables compared to the current carrying value (original cost basis adjusted for unpaid accrued interest and principal pay downs) of the retained interest. The discount rate is based on a rate of return, adjusted for specific risk factors that would be expected by an unrelated investor in a similar stream of cash flows. Provisions for losses are charged to earnings when it is determined that the retained interest’s carrying value is greater than the present value of expected future cash flows. No provision for losses was recorded during the years ended December 31, 2000, 2001 and 2002.

The following summarizes the changes in the balance of the investment in retained interest for 2002 (in thousands):

	Amortized		Unrealized		Carrying
	Cost		Gain		Value
Balance at December 31, 2001	$	15,929	$	1,997	$	17,926
Interest accrued		5,707		–		5,707
Payments received		(13,929)		–		(13,929)
Decrease in unrealized gain		–		(1,448)		(1,448)
Balance at December 31, 2002	$	7,707	$	549	$	8,256

The following summarizes the changes in the balance of the investment in retained interest for 2001 (in thousands):

	Amortized		Unrealized		Carrying
	Cost		Gain		Value
Balance at December 31, 2000	$	26,748	$	4,868	$	31,616
Interest accrued		9,806		–		9,806
Refund of Deposit		50		–		50
Payments received		(20,675)		–		(20,675)
Decrease in unrealized gain		–		(2,871)		(2,871)
Balance at December 31, 2001	$	15,929	$	1,997	$	17,926

The following summarizes the changes in the balance of the investment in retained interest for 2000 (in thousands):

	Cash		Amortized		Unrealized		Carrying
	Reserves		Cost		Gain		Value
Balance at December 31, 1999	$	660	$	22,694	$	7,201	$	30,555
Interest accrued		–		11,679		–		11,679
Refund of reserve account		(660)		–		–		(660)
Payments received		–		(7,625)		–		(7,625)
Decrease in unrealized gain		–		–		(2,333)		(2,333)
Balance at December 31, 2000	$	–	$	26,748	$	4,868	$	31,616

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1999 Warehouse and 1999 Securitization Financing
On March 31, 1999, Encore, through Midland Funding 98-A Corporation, a bankruptcy remote, special purpose subsidiary, entered into a $35 million securitized receivables acquisition facility (the “Warehouse Facility”), structured as a term loan with a final payment date of December 15, 2004. As of December 31, 2002, the balance outstanding under this facility amounts to $5.6 million (see Note 7). The facility accrues interest at 1.17% plus the one-week London interbank offered rate (“LIBOR”) totaling 2.67% per annum at December 31, 2002.

On January 18, 2000, Midland Receivables 99-1 Corporation, a bankruptcy remote, special purpose subsidiary of Encore, issued securitized non-recourse notes in the amount of $28.9 million, bearing interest at 10% per annum (“Securitization 99-1”). The outstanding balance under this facility is $6.6 million at December 31, 2002 (see Note 7). The Warehouse facility and Securitization 99-1 are collateralized and cross-collateralized by certain charged-off receivables with an aggregate carrying amount of approximately $13.3 and $5.4 million and cash reserve and collection accounts of $2.2 million and $2.3 million at December 31, 2001 and 2002, respectively, and are insured through a financial guaranty insurance policy. The insurance policy requires the payment of base premium on a monthly basis and an additional premium, which is due at the debt maturity. The deferred premium totaled $1.3 million and $1.8 million at December 31, 2001 and 2002, respectively, which has been reflected in accounts payable and accrued liabilities in the accompanying consolidated statements of financial condition. The Warehouse Facility and Securitization 99-1 have been accounted for as financing transactions.

Effective September 30, 2002, the Company entered into amendments to both the Warehouse facility and Securitization 99-1 agreements. As amended, these agreements provide, among other things, that the Company must (i) maintain on a consolidated basis a minimum net worth of $5.0 million, (ii) be reappointed as servicer by the note insurer every six months subsequent to April 30, 2003, and (iii) adhere to a maximum debt balance covenant which compares the actual note balances to an agreed upon schedule at the end of each six-month interval. If the actual balances were to exceed the agreed upon amounts, this would constitute an event of servicer default and could result in the Company’s removal as servicer. As of December 31, 2002, the Company was not in compliance with the maximum debt balance covenant, and as required under the agreement, lowered its servicing fee from 35% to 30%.

Income related to the Warehouse facility and Securitization 99-1 is being recognized over the estimated lives of the securitized receivables and both the receivables and the corresponding debt remain on the Company’s consolidated balance sheet. The assets pledged, together with their associated cash flows, would not be available to satisfy claims of the Company’s general creditors.

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6. Property and Equipment

Property and equipment consist of the following at December 31 (in thousands):

	2001		2002
Furniture, fixtures and equipment	$	1,171	$	1,192
Computer equipment and software		7,852		8,467
Telephone equipment		1,652		1,704
Leasehold improvements		279		341
		10,954		11,704
Accumulated depreciation and amortization		(5,710)		(8,163)
	$	5,244	$	3,541

7. Notes Payable and Other Borrowings

The Company is obligated under the following borrowings as of December 31 (in thousands):

		2001		2002
Secured financing facility, at Prime Rate plus 2.85%,
7.10% at December 31, 2002, due various dates through
March 27, 2005	$	23,291	$	24,984
Notes payable, Securitization 99-1, 10%,
due December 15, 2004 (Note 5)		12,436		6,641
Revolving line of credit at the Prime Rate, 4.25% at
December 31, 2002, due April 15, 2003		14,729		3,933
Warehouse facility, LIBOR plus 1.17%, 2.67% at
December 31, 2002, due December 15, 2004 (Note 5)		8,211		5,623
Senior notes, increasing rates, due January 15, 2007 (Note 2)		10,000		7,250
Payment-in-kind notes, 12%, due July 1, 2005 (Note 2)		1,921		–
		70,588		48,431
Less: Unamortized debt discount		(1,373)		(742)
	$	69,215	$	47,689

Revolving Line of Credit
The Company entered into the Sixth Amended and Restated Promissory Note effective March 22, 2002 to renew the Company’s revolving line of credit. The $15.0 million revolving line of credit carries interest at the Prime Rate and matures on April 15, 2003. Certain stockholders of Encore, including Triarc Companies, Inc. (“Triarc”), have guaranteed this unsecured revolving line of credit. Triarc has a $15.0 million interest-bearing deposit in a custodial account at the financial institution providing the revolving credit facility. Such deposit under the guarantees of the revolving credit borrowings is subject to set off under certain circumstances if the parties to the guarantees of the revolving credit borrowings and related agreements fail to perform their obligations there under. The lender has agreed in principle to extend the maturity date of the line of credit at a reduced principal amount of $5 million through April 15, 2004. Such reduced line of credit would continue to be guaranteed by the directors, stockholders and affiliates referred to above. In connection with such guarantee, an aggregate fee of up to $75,000 per quarter would be paid to all or some of such parties. At December 31, 2001 and 2002, the Company had available unused lines of credit in the amount of $0.3 million and $11.1 million, respectively.

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Senior Notes
In January 2000, the Company obtained additional financing through the issuance of $10.0 million principal amount senior notes to an institutional investor. The notes are unsecured obligations of the Company but are guaranteed by Midland Credit and Triarc. In connection with the issuance of the notes, the Company issued warrants to the note holders and Triarc to acquire up to an aggregate of 528,571 shares of common stock of the Company at an exercise price of $0.01 per share. In addition, the notes require semiannual interest payments on January 15 and July 15; however, during the first two years the notes were outstanding, interest was paid-in-kind through issuance of additional 12% Senior Notes. On February 22, 2002, the institutional investor forgave $5.3 million of outstanding debt, consisting of a $2.8 million reduction in the original note balance, the forgiveness of $1.9 million in Payment-in-Kind Notes, and the forgiveness of $0.6 million in interest accrued through December 31, 2001, and reduced its warrant position by 200,000 warrants (see Note 2). In conjunction with the debt forgiveness, capitalized loan costs totaling $0.1 million and debt discount totaling $0.5 million were written-off. The net gain on debt forgiveness totaling $4.7 million was reflected as an adjustment to stockholders equity. Furthermore, the terms of the Senior Notes and Payment-in-Kind Notes were revised. The Senior Notes now bear interest at 6% per annum until July 15, 2003, and 8% per annum from July 16, 2003 to January 15, 2007, when the entire unpaid amount is due. The Senior Notes require semi-annual interest payments on January 15 and July 15. At the Company’s option, interest due through July 15, 2003 may be repaid with Payment-in-Kind Notes. Such notes would accrue interest at 6% per annum through July 15, 2003 and 8% per annum thereafter and would be due July 1, 2005. The Company elected to make the first two payments in cash.

Secured Financing Facility
On December 20, 2000, MRC Receivables Corporation, a wholly-owned bankruptcy-remote, special-purpose entity, entered into a $75 million secured financing facility (the “Secured Financing Facility”), which expires on December 31, 2004. The Secured Financing Facility generally provides for a 90% advance rate with respect to each qualified receivable portfolio purchased. Interest accrues at the prime rate plus 2.85% per annum and is payable weekly. Once the outstanding balance under this facility exceeds $25 million, the floating rate margin reduces by 1% on the amounts in excess of $25 million. Notes to be issued under the facility are collateralized by the charged-off receivables that are purchased with the proceeds from this financing arrangement. Each note has a maturity date not to exceed 27 months after the borrowing date. Once the notes are repaid and the Company has been repaid its investment, the Company and the lender share remaining cash flows from the receivable portfolios, net of servicing fees. As of December 31, 2002, from the inception of the Secured Financing Facility, the Company purchased portfolios with a face value of $4.2 billion at a price of approximately $100.0 million. During the years ended December 31, 2001 and December 31, 2002, the Company recorded $2.1 million and $13.0 million, respectively, in contingent interest expense relating to the remaining cash flow sharing agreement. The Secured Financing Facility is collateralized by certain charged off receivables with an aggregate carrying amount of $56.8 at December 31, 2002. The assets pledged under this financing facility, together with their associated cash flows, would not be available to satisfy claims of general creditors of the Company.

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In conjunction with the Secured Financing Facility, the Company issued warrants to purchase up to 621,576 shares of Encore’s common stock at $1.00 per share subject to customary anti-dilution adjustments. Of the warrants issued, 155,394 were exercisable immediately, and the remaining warrants become exercisable in three equal tranches triggered at the time the Company has drawn an aggregate of $22.5 million, $45.0 million and $67.5 million against the facility, respectively. The first tranche was triggered during 2001, the second tranche was triggered in the first quarter of 2002, and the final tranche was triggered in the third quarter of 2002, thus warrants representing 310,788, and 621,576 shares of the Company’s common stock were exercisable under this facility at December 31, 2001 and December 31, 2002, respectively. The warrants that became exercisable during 2001 were valued at $0.1 million, as were the warrants issued during 2002, and were recorded as deferred loan costs in other assets, and as a component of stockholders’ equity (deficit).

Stand-by Line of Credit
Effective October 31, 2000, the Company executed an agreement with certain of its affiliates for a $2.0 million stand-by working capital line of credit secured by substantially all of the Company’s assets and those of its subsidiaries. In connection with this agreement, the lenders received 250,000 warrants to acquire the Company’s common stock at $0.01 per share. As of December 31, 2001, when the stand-by line expired, no indebtedness existed. The fair value of the warrants, $0.1 million, was accounted for by recording deferred loan costs with an offset to additional paid-in capital as a component of stockholders’ equity. All 250,000 warrants were exercised on April 16, 2002 (Note 10).

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8. Income Taxes

The provision for income taxes on income before extraordinary charge consists of the following for the years ended December 31 (in thousands):

	2000		2001		2002
Current expense (benefit):
Federal		$     (418)	$	–	$	–
State		–		–		531
		(418)		–		531
Deferred expense
Federal		(5,422)		892		(5,766)
State		(1,417)		257		(468)
		(6,839)		1,149		(6,234)
	$	(7,257)	$	1,149	$	(5,703)

The Company has Federal, Arizona state, and California state net operating loss carryforwards of approximately $14.1 million, $4.9 million and $3.2 million, respectively, as of December 31, 2002. The Company is a loss corporation as defined in Section 382 of the Internal Revenue Code. Therefore, if certain changes in the Company's ownership should occur, there could be a significant annual limitation on the amount of loss carryforwards and future recognized losses that can be utilized and ultimately some amount of loss carryforwards may not be available. The remaining net operating losses for Federal purposes generated in 2000 and 2001 of $4.8 million and $9.2 million, respectively, expire in 2020 and 2021, respectively. The remaining net operating losses for Arizona state income tax purposes generated in 2000 and 2001 of $0.2 million and $4.7 million, respectively, expire in 2010 and 2011, respectively. The remaining net operating losses for California state income tax purposes generated in 2000 and 2001 of $0.7 million and $2.5 million, respectively, expire in 2012 and 2013, respectively. Utilization of such California net operating losses have been suspended by the State of California until 2004.

The components of deferred tax assets and liabilities consist of the following as of December 31 (in thousands):

	2001		2002
Deferred tax assets:
Net operating losses	$	9,118	$	5,197
Accrued expenses		200		331
Differences in income recognition related to
receivable portfolios and retained interest		3,519		4,080
		12,837		9,608
Less valuation allowance		(10,071)		(184)
		2,766		9,424
Deferred tax liabilities:
Contingent Interest expense		1,041		1,555
Unrealized gain on retained interest in
securitized receivables		782		215
Deferred court costs		454		457
Other		489		384
		2,766		2,611
Net deferred tax asset	$	–	$	6,813

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SFAS No. 109 requires a valuation allowance against deferred tax assets if, based on available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. As of December 31, 2001, the Company continued to believe that some uncertainty existed with respect to the future utilization of net operating losses and other deferred tax assets; therefore, the Company provided a valuation allowance relating to such items arising in 2001. For the year ended December 31, 2001, the net deferred taxes were zero after the application of the valuation allowance. For the year ended December 31, 2002, the Company determined that the utilization of net operating loses and other deferred tax assets were more likely than not, and therefore removed all but $0.2 million of the valuation allowance. The change in the valuation allowance resulted in the recognition of a current tax benefit in the amount of $6.2 million in the fourth quarter of 2002.

The 1998 securitization transaction qualified as a financing for income tax purposes; therefore, the Company recorded a deferred tax liability pertaining to the unrealized gain on the retained interest in the amount of $3.3 million, as no gain was recorded for income tax purposes. The decrease during 2001 and 2002 in the deferred tax liability of $1.1 million and $0.6 million, respectively, relates to the decrease in the unrealized gain on retained interest in securitized receivables which is recorded as a component of other comprehensive loss in the accompanying consolidated statements of stockholders' equity.

The differences between the total income tax expense and the income tax expense computed using the applicable federal income tax rate of 35% per annum were as follows for the years ended December 31 (in thousands):

	2000		2001		2002
Computed "expected" federal	$	(10,845)	$	(3,401)	$	2,830
income tax expense (benefit)
Increase (decrease) in income
taxes resulting from:
State income taxes, net		(1,612)		–		63
Gain on debt forgiveness		–		–		1,633
Other adjustments, net		68		34		(342)
Increase (decrease) in valuation
allowance		5,132		4,516		(9,887)
	$	(7,257)	$	1,149	$	(5,703)

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9. Leases

The Company leases office facilities and equipment in Phoenix, Arizona and in San Diego, California. The leases are structured as operating leases, and the Company incurred related rent expense in the amounts of $1.1 million, $1.3 million and $1.3 million during 2000, 2001 and 2002, respectively.

Commitments for future minimum rentals as of December 31, 2002 are presented below for the years ending December 31: (in thousands):

2003	$	786
2004		877
2005		390
2006		390
2007		390
Thereafter		292
	$	3,125

The Company leases certain property and equipment through capital leases. These long-term leases are noncancelable and expire on varying dates through 2004. At December 31, 2001 and 2002, the cost of assets under capital leases is $3.0 million and $0.9 million, respectively. The related accumulated amortization as of December 31, 2001 and 2002, was $1.2 million and $0.5 million, respectively. Amortization of assets under capital leases is included in depreciation and amortization expense.

Future minimum lease payments under capital lease obligations consist of the following for the years ending December 31, (in thousands):

2003	$	282
2004		70
		352
Less amount representing interest
at 3.345% per annum		(8)
	$	344

10. Common Stock Warrants

In connection with the issuance of $10 million of 12% senior notes to an institutional lender in January 2000 (see Note 7), the Company issued warrants to the lender and to Triarc to acquire 428,571 and 100,000 shares, respectively, of common stock of the Company at an exercise price of $0.01 per share. The Company also paid a fee to Triarc in the amount of $0.2 million as consideration of Triarc’s guarantee of this indebtedness. The Company engaged an independent valuation firm to determine the value of the warrants for allocation to the $10.0 million principal amount. The warrants were valued at $3.05 per share and, thus, recorded as a component of stockholders’ equity (deficit) in the amount of $1.6 million with the same amount recorded as debt discount relating to the $10.0 million note payable. The $1.6 million debt discount is being amortized as interest expense over the five-year exercise period of the warrants, resulting in a remaining debt discount balance of $0.7 million at December 31, 2002. The agreements pursuant to which the warrants were issued contain anti-dilution provisions which, as of December 31, 2002, have resulted in the issuance of additional warrants to purchase shares of the Company’s common stock to the lender and Triarc totaling 5,241 and 1,275, respectively, at the $0.01 per share. The anti-dilution warrants were valued at $3,000 and recorded as a component of stockholders’ equity (deficit) and as debt discount relating to the $10.0 million note payable. During 2002, the institutional lender forgave warrants to purchase 200,000 shares of the Company’s common stock (see Note 2 and 7).

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In conjunction with the Secured Financing Facility, the Company issued warrants to purchase up to 621,576 shares of Encore’s common stock at $1.00 per share subject to customary anti-dilution adjustments. Of the warrants issued, 155,394 were exercisable immediately, and the remaining warrants become exercisable in three equal tranches triggered at the time the Company has drawn an aggregate of $22.5 million, $45.0 million and $67.5 million against the facility, respectively. The first tranche was triggered in the third quarter of 2001, the second tranche was triggered in the first quarter of 2002, and the final tranche was triggered in the third quarter of 2002. Thus warrants representing 310,788, and 621,576 shares of the Company’s common stock were exercisable under this facility at December 31, 2001 and December 31, 2002, respectively. The warrants that became exercisable during 2001 were valued at $0.1 million, as were the warrants issued during 2002, and were recorded as deferred loan costs in other assets, and as a component of stockholders’ equity (deficit).

Effective October 31, 2000, the Company executed an agreement with certain of its affiliates for a $2.0 million stand-by working capital line of credit secured by substantially all of the Company’s assets and those of its subsidiaries. In connection with this agreement, the lenders received 250,000 warrants to acquire the Company’s common stock at $0.01 per share. As of December 31, 2001, when the stand-by line expired, no indebtedness existed. The fair value of the warrants, $0.1 million, was accounted for by recording deferred loan costs with an offset to additional paid-in capital as a component of stockholders’ equity. All 250,000 warrants were exercised on April 16, 2002.

11. Employee Benefit Plan

The Company maintains a 401(k) Salary Deferral Plan (the “Plan”) whereby eligible employees may voluntarily contribute up to a maximum percentage of compensation, subject to Internal Revenue Code limitations. Company management may match a percentage of employee contributions at its discretion. Employer matching contributions and administrative costs relating to the Plan totaled $0.1 million, $0.2 million and $0.4 million for 2000, 2001 and 2002, respectively.

Effective March 1, 2002, the Company adopted a non-qualified deferred compensation plan for its senior management. This plan permits deferral of a portion of compensation until a specified period of time. As of December 31, 2002, both the current vested liability and the plan assets were $0.5 million and are included in the Company’s balance sheet in accrued liabilities and other assets, respectively. The use of plan assets is legally restricted to distributions to participants or creditors in the event of bankruptcy.

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12. Stock-Based Compensation

The 1999 Equity Participation Plan (“1999 Plan”), as amended, permits the grant of stock or options to employees, directors and consultants. A total of 2,600,000 shares were approved by the stockholders for issuance under the 1999 Plan. Options may be granted at prices which exceed 85% of the fair market value on the date of the grant, and expire over a term not to exceed ten years. Options generally vest ratably over a three-year period, unless otherwise determined by the Board of Directors.

During 2000 and 2001, the Company granted stock options to purchase 985,000 shares of its common stock to certain employees. These options become exercisable over the next five years in varying amounts depending on the terms of the individual option agreements and have a term of 10 years. Since the exercise price of the stock options was equal to the estimated market value of the underlying common stock at the date of grant, no compensation expense was recognized.

In January 2002, the Company’s board of directors approved issuance of stock options for key personnel to purchase a total of 161,000 shares of the Company’s common stock at an exercise price of thirty-five cents per share. The options vest over three years with the first vesting date in January 2003. As the exercise price equaled the estimated market value of the underlying common stock as the date of grant, no compensation expense is recognized.

In July 2002, the Company’s board of directors approved issuance of a stock option to an officer to purchase 50,000 shares of the Company’s common stock at an exercise price of fifty-two cents per share. The option vests over three years with the first vesting date in June 2003. Also, during 2002, 50,000 stock options previously issued to an officer expired upon their separatation from the Company.

In September 2002, the Company’s board of directors approved issuance of stock options for certain executive officers of the Company to purchase a total of 624,999 shares of the Company’s common stock at an exercise price of fifty-one cents per share. The options vest upon the earlier of (i) an acquisition at a price in excess of $5.00 per share by any party of 60% or more of the Company’s common and preferred stock (on an as converted and fully diluted basis) other than by the Company’s current major institutional investors or any affiliate thereof, (ii) the completion of one or more secondary public offerings at a price in excess of $5.00 per share by all Encore shareholders owning more than 10% of the Company’s common and preferred stock (on an as converted basis and fully diluted basis) as of October 24, 2002, of more than one half of each of their then current equity ownership interest (on an as converted and fully diluted basis) as of the effective date of the registration statement, (iii) five years from the date of grant, or (iv) such other events determined by the Board of Directors.

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In January 2003, the Company’s board of directors approved issuance of stock options for key personnel to purchase a total of 278,500 shares of the Company’s common stock at an exercise price of $1.30 per share. The options vest ratably over three years commencing with January 2004.

Pro forma information regarding net income (loss) and earnings (loss) per share is required by SFAS No. 123 and has been determined as if the Company had accounted for these stock options under the fair-value method of SFAS No. 123. The fair value for options granted was estimated at the date of grant using a Black-Scholes option pricing model with the following weighted-average assumptions for the years ended December 31, 2000, 2001 and 2002:

	2000	2001	2002
Risk free interest rate	6%	4.5%	2.7%
Dividend yield	0%	0%	0%
Volatility factors of the
expected market price of the
Company's common stock	64%	140%	113%
Weighted-average expected life of
options	10 years	5 years	5 years

The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options which have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions including the expected stock price volatility. Because the Company's employee stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management's opinion, the existing models do not necessarily provide a reliable single measure of the fair value of its employee stock options.

For purposes of pro forma disclosures, the estimated fair value of the options is amortized to expense over the options' vesting period. The Company's pro forma information follows (in thousands, except per share amounts):

	2000		2001		2002
Net Income (loss), as reported	$	(23,730)	$	(10,865)	$	13,789
Plus: Stock-based employee
compensation expense included in
reported net income		–		–		–
Less: Total stock-based employee
compensation expense determined
under fair value based method		(392)		(45)		(323)
Pro forma net income (loss)	$	(24,122)	$	(10,910)	$	13,466
Earnings (loss) per share:
Basic - as reported	$	(3.20)	$	(1.52)	$	1.82
Basic - pro forma	$	(3.25)	$	(1.52)	$	1.77
Diluted - as reported	$	(3.20)	$	(1.52)	$	0.84
Diluted - pro forma	$	(3.25)	$	(1.52)	$	0.82

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A summary of the Company's stock option activity and related information is as follows:

						Weighted-
				Weighted-		Average
				Average		Fair Value
	Number of		Option Price	Exercise		of Options
	Shares		Per Share	Price		Granted
Outstanding at December 31, 1999		273,823	$3.04-$10.00	$	6.00
Granted		1,250,000	1.00		1.00		$0.30
Expired		(273,823)	6.00		6.00
Outstanding at December 31, 2000		1,250,000	1.00		1.00
Granted		135,000	1.00		1.00		$0.43
Cancelled		(350,000)	1.00		1.00
Outstanding at December 31, 2001		1,035,000	1.00		1.00
Granted		835,999	0.35-0.52		0.48		$0.39
Cancelled		(50,000)	1.00		1.00
Outstanding at December 31, 2002		1,820,999	$0.35-$1.00	$	0.76

The following table summarizes outstanding and exercisable options at December 31, 2002:

	Options Outstanding						Options Exercisable
			Weighted-		Weighted-				Weighted-
			Average		Average				Average
	Number		Exercise		Remaining		Number		Exercise
Exercise Prices	Outstanding		Price		Life		Outstanding		Price
$0.35 - $0.52		835,999		$0.48		9.4 years		–		–
$1.00		985,000		$1.00		7.1 years		467,500		$1.00
$0.35 - $1.00		1,820,999		$0.76		8.2 years		467,500		$1.00

13. Earnings (Loss) Per Share

Basic earnings per share are computed by dividing net income (loss) available to common stockholders by the weighted average number of common shares outstanding for the reporting period. Diluted earnings per share are computed similar to basic earnings (loss) per share while giving effect to all potential dilutive common stock equivalents that were outstanding during the period.

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The following is a reconciliation from basic earnings (loss) per share to diluted earnings per share for the years ended December 31, 2000, 2001 and 2002 (in thousands, except for earnings per share):

	2000		2001		2002
Net income (loss)	$	(23,730)	$	(10,865)	$	13,789
Preferred dividends		–		–		(440)
Net income (loss) available to common stockholders	$	(23,730)	$	(10,865)	$	13,349
Weighted average shares outstanding
	$	7,421	$	7,161	$	7,339
Incremental shares from assumed conversion of
warrants, options, and preferred stock		–		–		9,120
Adjusted weighted average shares outstanding	$	7,421	$	7,161	$	16,459
Earnings (loss) per share - Basic	$	(3.20)	$	(1.52)	$	1.82
Earnings (loss) per share - Diluted	$	(3.20)	$	(1.52)	$	.84

In 2000 and 2001, due to antidilutive effect arising from the loss from continuing operations all common stock equivalents were excluded from the computation. In 2002, 985,000 stock options and 621,576 stock warrants were excluded from the computation of diluted earning per share because of their anti-dilutive effect.

14. Commitments and Contingencies

Litigation
The Fair Debt Collection Practices Act (“FDCPA”) and comparable state statutes may result in class action lawsuits, which can be material to the Company’s business due to the remedies available under these statutes, including punitive damages.

In February 2001, in the Superior Court of the State of Arizona, County of Maricopa, our subsidiary Midland Credit Management, Inc. and two of its wholly owned subsidiaries, Midland Funding 98-A Corporation and Midland Receivables 99-1 Corporation, filed a lawsuit against MBNA America Bank, NA (“MBNA”). The Company has alleged, among other things, fraud, fraudulent inducement, breach of contract and negligent misrepresentation arising out of the acquisition of charged-off receivables purchased from MBNA between September 1999 and February 2000. See discussion regarding settlement at Note 16.

On May 28, 2002, a complaint was filed by plaintiff Lana Waldon in the United States District Court for the Northern District of Texas against the Company’s wholly-owned subsidiary Midland Credit Management, Inc. and an unaffiliated financial institution, in which the plaintiff purports to assert a claim for alleged violation of the Fair Debt Collection Practices Act, the Texas Debt Collection Act and the Texas Deceptive Trade Practices Act on behalf of a class of Texas residents allegedly similarly situated. Generally, the complaint alleges that mailings related to a credit card balance transfer program are deceptive and misleading. The complaint seeks actual, statutory and treble damages in an amount to be determined, together with pre-judgment and post-judgment interest, attorneys’ fees, and preliminary and permanent injunctions enjoining defendants from making offers or distributing materials substantially similar to the mailings that are the subject of the complaint, plus certain other relief. The defendants have filed motions to dismiss but no hearing on the motions has been scheduled. No motion for class certification has yet been filed. It is expected that the plaintiff will seek to expand the putative class to a nationwide class with respect to the non-local claims asserted, if the current complaint survives dismissal.

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There are a number of additional lawsuits or claims pending or threatened against the Company. In general, these lawsuits or claims have arisen in the ordinary course of business and involve claims for actual damages arising from alleged misconduct of the Company’s employees or alleged improper reporting of credit information by the Company. Although litigation is inherently uncertain, based on past experience, the information currently available, and the possible availability of insurance and/or indemnification from originating institutions in some cases, management of the Company does not believe that the currently pending and threatened litigation or claims will have a material adverse effect on the Company’s consolidated financial position or results of operations. However, management is not currently in a position to determine whether the resolution of pending or threatened litigation or claims will ultimately have a material effect on the Company’s financial position or results of operations in any future reporting period.

The Company does not believe that contingencies for ordinary routine claims, litigation and administrative proceedings and investigations incidental to its business will have a material adverse effect on its consolidated financial position or results of operations.

Sales of Purchased Receivables
The Company sells certain purchased receivables, including those which it deems are otherwise uncollectable as a result of the debtors’ bankrupt status and other types of receivables. The sales agreement provides the purchaser a right to put-back any purchased receivable that does not meet certain criteria, as defined. The Company has not provided a reserve for put-backs as of December 31, 2002 in its consolidated financial statements as management believes, based on historical experience, that such an obligation is de minimis.

Third Party Service Agreement
The Company services a pool of charged-off consumer accounts on behalf of an unrelated third party. The agreement is cancelable upon written notice. The Company receives a service fee, as defined, for its collections that totaled $4.3 million, $5.5 million and $3.7 million for the years ended December 31, 2000, 2001 and 2002, respectively. The service fee recognized during the year ended December 31, 2001 includes a non-recurring fee totaling $0.8 million which relates to the Company’s assistance with the sale of a component of the pool it services. In December of 2002, the Company decided to return all exhausted receivables to the owner. As a result of this decision, the Company anticipates a decreasing stream of service fee income related to these receivables.

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Employment Agreements
In March 2002, the Company entered into two employment agreements with executive officers. Such agreements generally provided for one-year terms and base compensation aggregating $0.6 million per annum, plus incentive compensation, as defined. The agreements provide for severance payments over periods between one year and one and a half years upon termination without cause, as defined. During the second quarter of 2002, the Company reached agreement on severance matters with a former officer. In connection therewith, the Company paid $0.5 million for release of all claims and liability.

15. Quarterly Information (Unaudited) (in thousand, except per share amounts)

	Three Months Ended
	March 31		June 30		September 30		December 31
2001
Revenues		$8,677		$10,441		$13,569		$15,158
Total operating expenses		$10,321		$11,578		$11,376		$13,549
Net loss		($ 3,743)		($ 3,880)		($ 1,045)		($ 2,197)
Basic loss per share		($ 0.52)		($ 0.54)		($ 0.15)		($ 0.31)
Diluted loss per share		($ 0.52)		($ 0.54)		($ 0.15)		($ 0.31)
2002
Revenues		$18,196		$20,129		$24,406		$27,649
Total operating expenses		$13,813		$15,369		$16,502		$18,231
Net income		$233		$692		$2,521		$10,343
Basic earnings per share		$0.02		$0.08		$0.32		$1.38
Diluted earnings per share		$0.02		$0.04		$0.14		$0.57

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16. Subsequent Event

On March 21, 2003, Midland Credit, a subsidiary of Encore, and two of Midland Credit's wholly owned subsidiaries, Midland Funding 98-A Corporation and Midland Receivables 99-1 Corporation, entered into a settlement agreement with MBNA in connection with a lawsuit filed against MBNA in the Superior Court of the State of Arizona, County of Maricopa, in February 2001 (see Note 14). Pursuant to the terms of the settlement, MBNA is to pay Midland Credit $11.1 million on or before April 4, 2003 in full and complete satisfaction of the Company's claims. The net proceeds which are currently estimated to be approximately $7.9 million, which is net of litigation expenses and attorneys fees, will be used to repay holders of the Warehouse Facility and Securitization 99-1 (see Notes 5 and 7). To date, the Company has not received payment. Upon receipt of the settlement, the Company will record a net gain, which will be comprised of the net proceeds as reduced by the remaining carrying value of the related receivable portfolios at that date.

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