Wendy’s/Arby’s Group Reports Fourth Quarter and Full-Year 2010 Results

Wendy’s/Arby’s Group, Inc. (NYSE: WEN), the third largest quick-service restaurant company in the United States, today reported results for the fourth quarter and year ended January 2, 2011. The Company had previously reported preliminary fourth quarter and full-year results as well as plans to explore strategic alternatives for Arby’s Restaurant Group, Inc., including a sale of the brand, prior to hosting its Investor Day on January 27, 2011. The results released today are consistent with preliminary results.

Roland Smith, President and Chief Executive Officer of Wendy’s/Arby’s Group, stated: “We view Wendy's® as one of the most attractive long-term growth stories in the quick-service restaurant industry. As we highlighted at our recent Investor Day, we are implementing a comprehensive plan to drive incremental sales at existing restaurants by introducing exciting new products, expanding dayparts and modernizing our facilities. We will also rapidly grow our global footprint by opening new restaurants in international markets and in underpenetrated North American markets. By successfully executing these compelling growth opportunities and using the strength of our balance sheet and free cash flow, we intend to unlock the long-term earnings potential of the brand and maximize shareholder value.”

Consolidated Fourth Quarter 2010 Summary (13 weeks in 2010 vs. 14 weeks in 2009)

• Adjusted EBITDA¹ was $84.0 million, excluding net pre-tax special items of $1.8 million. This is a decrease of 6.4% as compared to fourth quarter 2009 adjusted EBITDA of $89.7 million, excluding pre-tax integration-related costs and non-recurring net costs of $20.7 million and adjusted EBITDA of $13.6 million for the extra week in the quarter.
• Consolidated revenues were $840.7 million as compared to fourth quarter 2009 revenues of $900.9 million.
• Net loss was $10.8 million or $0.03 per share, including net after-tax special charges of $16.5 million or $0.04 per share. Fourth quarter 2009 net loss from continuing operations was $14.7 million, or $0.03 per share, including after-tax special charges of $44.5 million or $0.10 per share.

Consolidated Full-Year 2010 Summary (52 weeks in 2010 vs. 53 weeks in 2009)

• Adjusted EBITDA was $396.9 million, excluding net pre-tax special charges of $12.9 million. This is a decrease of 3.6% as compared to 2009 full-year adjusted EBITDA of $411.6 million, excluding pre-tax integration-related costs and non-recurring net costs of $40.8 million and 53^rd week adjusted EBITDA of $13.6 million.
• Consolidated revenues were $3.4 billion as compared to full-year 2009 revenues of $3.6 billion.
• Net loss was $4.3 million, or $0.01 per share, including net after-tax special charges of $64.7 million, or $0.15 per share, as compared to full-year 2009 net income from continuing operations of $3.5 million, or $0.01 per share including net after-tax special charges of $84.7 million or $0.18 per share.

2011 Outlook

The Company anticipates 2011 pro forma EBITDA will be in a range of $345 million to $355 million. The 2011 pro forma Company EBITDA outlook assumes a sale of Arby’s® and that related general and administrative (G&A) expense reductions occurred as of the beginning of fiscal 2011.

The 2011 pro forma EBITDA outlook, which the Company provided on January 26, includes the following expectations:

• Same-store sales growth of 1% to 3% at Wendy’s North America company-operated restaurants.
• Improvement of 30 to 60 basis points in Wendy’s company-operated restaurant margin.
• Capital expenditures for the Wendy’s brand of approximately $145 million.
• Wendy’s North America unit development of approximately 20 company stores and 45 franchise stores, plus approximately 50 international franchise stores.

Smith stated: “We are reiterating our 2011 outlook and reaffirming Wendy’s longer term target of 10% to 15% in average annual EBITDA growth, beginning in 2012. This year represents a transition period for our Company as we are exploring strategic alternatives for Arby's, including a sale of the brand, reducing our corporate G&A to support a single brand and focusing our energies on investing in Wendy's growth opportunities.”

Fourth Quarter and Full-Year 2010 Special Expense Charges

For the fourth quarter 2010, the Company recorded net after tax special charges of $16.5 million, including integration-related expenses, impairment charges, incremental advertising for Wendy’s new breakfast, costs related to Strategic Sourcing Group purchasing co-op (SSG) and reversal of pension withdrawal expense. For the full-year 2010, the Company recorded net after tax special charges of $64.7 million, including integration-related expenses, impairment charges, incremental advertising for Wendy’s new breakfast, costs related to SSG, reversal of pension withdrawal expense, costs related to refinancing the senior secured credit facility and the related debt repayments, partially offset by income recognized from the collection of the Deerfield Capital Corp. note as the proceeds exceeded the carrying value of the note.

2010 Cash Flow

For the full-year 2010, net cash from operating activities totaled $226.3 million. Net cash used was $79.2 million, including the effect of capital expenditures of $148.0 million and share repurchases of $173.5 million. At year-end, cash and cash equivalents were $512.5 million, which provides significant financial flexibility to fund future capital expenditures and growth initiatives.

Recent International Growth Announcements

The Company recently announced two new agreements - a development agreement to further expand Wendy’s in the Philippines and a joint venture agreement to re-launch the brand in Japan. The new agreement in the Philippines market with Wenphil, a Wendy’s franchisee since 1983, calls for the development of 44 additional restaurants, which would increase the total number of Wendy’s locations in the country to 75. The joint venture agreement in Japan with Ernest Higa and Higa Industries Co., Ltd., a successful food importer and distributor, provides for the re-launch of Wendy’s in Japan. The first Wendy’s restaurant is expected to open in Tokyo later this year with plans to rapidly expand the brand in the city and the remainder of the country in the coming years.

Since June 2009, Wendy’s/Arby’s Group subsidiaries have signed new development agreements for portions of the Middle East and North Africa, Singapore, Turkey, Russia, the Eastern Caribbean and Argentina.

Logos, product and company names mentioned are the property of their respective owners.

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