UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): July 8, 2011 (July 4, 2011)
Commission file number: 1-2207
THE WENDY’S COMPANY
(Exact name of registrant as specified in its charter)
Delaware
 
38-0471180
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer Identification No.)
 
 
 
1155 Perimeter Center West, Atlanta, GA
 
30338
(Address of principal executive offices)
 
(Zip Code)
(678) 514-4100
(Registrant’s telephone number, including area code)
 
(Former name or former address if changed since last report)
Commission file number: 333-161613
WENDY’S RESTAURANTS, LLC
(Exact name of registrant as specified in its charter)
Delaware
 
38-0471180
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer Identification No.)
 
 
 
1155 Perimeter Center West, Atlanta, GA
 
30338
(Address of principal executive offices)
 
(Zip Code)
(678) 514-4100
(Registrant’s telephone number, including area code)

(Former name or former address if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registration under any of the following provisions:
o Written communications pursuant to Rule 425 under the Securities Act
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange
 
 
 
 
 



ITEM 2.01. COMPLETION OF ACQUISITION OR DISPOSITION OF ASSETS.
 
On July 4, 2011, Wendy’s/Arby’s Restaurants, LLC (“Wendy’s/Arby’s Restaurants”), a wholly-owned subsidiary of Wendy’s/Arby’s Group, Inc. (“Wendy’s/Arby’s”), completed the sale of 100% of the common stock of Arby’s Restaurant Group, Inc. (“Arby’s”), a wholly-owned subsidiary of Wendy’s/Arby’s Restaurants, to ARG IH Corporation (“Buyer”), a wholly-owned subsidiary of ARG Holding Corporation (“Buyer Parent”), for $130 million in cash (subject to customary purchase price adjustments) and 18.5% of the common stock of Buyer Parent (through which Wendy’s/Arby’s Restaurants will indirectly retain an 18.5% interest in Arby’s). The sale occurred pursuant to the terms of the Purchase and Sale Agreement by and among Wendy’s/Arby’s Restaurants, Buyer Parent and Buyer dated as of June 13, 2011 (the “Purchase and Sale Agreement”).
A copy of the Purchase and Sale Agreement is attached hereto as Exhibit 2.1 and is incorporated by reference herein.  The description of the Purchase and Sale Agreement set forth in this Item 2.01 is not complete and is qualified in its entirety by reference to the full text of the Purchase and Sale Agreement set forth in Exhibit 2.1.  The representations and warranties of the parties in the Purchase and Sale Agreement have been made solely for the benefit of the other parties to the Purchase and Sale Agreement, and were not intended to be, and should not be relied upon by the stockholders of The Wendy’s Company or any other persons or entities and should not otherwise in any way be treated as, categorical statements of fact, but rather as a way of allocating risk among the parties thereto.  Such representations and warranties have in some cases been qualified by disclosures that were made by one party to another in connection with the negotiation of the Purchase and Sale Agreement, which disclosures are not necessarily reflected in such agreement, and may apply standards of materiality in a way that is different from what may be material to investors.  Finally, such representations and warranties were made only as of the date of the Purchase and Sale Agreement or such other date or dates as may be specified in the Purchase and Sale Agreement and are subject to more recent developments.

In connection with the completion of the sale pursuant to the Purchase and Sale Agreement, Wendy’s/Arby’s Restaurants, Buyer Parent, Buyer and Roark Capital Partners II, LP entered into a closing letter dated as of July 1, 2011 (the “Closing Letter”).  A copy of the Closing Letter is attached hereto as Exhibit 2.2 and is incorporated by reference herein.

Effective as of July 5, 2011, Wendy’s/Arby’s changed its name to The Wendy’s Company and Wendy’s/Arby’s Restaurants changed its name to Wendy’s Restaurants, LLC, as previously reported in the Current Report on Form 8-K filed by The Wendy’s Company and Wendy’s Restaurants, LLC on July 5, 2011.


ITEM 7.01. REGULATION FD DISCLOSURE.

A reconciliation of pro forma earnings before interest, taxes, depreciation and amortization (“EBITDA”) for The Wendy’s Company for the three months ended April 3, 2011 and April 4, 2010 and for the year ended January 2, 2011 is being furnished as Exhibit 99.1 and incorporated herein by reference.

The information in Item 7.01 of this Current Report on Form 8-K, including Exhibit 99.1 furnished pursuant to Item 9.01, shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities under that Section.  Furthermore, the information in Item 7.01 of this Current Report on Form 8-K, including Exhibit 99.1 furnished pursuant to Item 9.01, shall not be deemed to be incorporated by reference into the filings of The Wendy’s Company or Wendy’s Restaurants, LLC under the Securities Act of 1933.


ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS.

(b) Pro forma financial information

The unaudited pro forma condensed consolidated balance sheets as of April 3, 2011 and unaudited pro forma condensed consolidated statements of operations of each of The Wendy’s Company and Wendy’s Restaurants, LLC for the three months ended April 3, 2011 and April 4, 2010 and the years ended January 2, 2011, January 3, 2010, and December 28, 2008, including combined notes to the unaudited pro forma condensed consolidated financial statements, are filed as Exhibit 99.2 hereto and are incorporated herein by reference.



2


(d)     Exhibits

Exhibit No.
Description
2.1
Purchase and Sale Agreement, dated as of June 13, 2011, by and among Wendy’s/Arby’s Restaurants, LLC, ARG Holding Corporation and ARG IH Corporation, incorporated herein by reference to Exhibit 2.1 of the Wendy’s/Arby’s Group, Inc. and Wendy’s/Arby’s Restaurants, LLC Current Reports on Form 8-K filed on June 13, 2011 (SEC file nos. 001-02207 and 333-16161, respectively.)
2.2
99.1
99.2




3



SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, each registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 
THE WENDY’S COMPANY
(Registrant)
Date: July 8, 2011
 
 
By: /s/Stephen E. Hare                                                               
 
Stephen E. Hare
 
Senior Vice President and
 
Chief Financial Officer
 
 


 
WENDY’S RESTAURANTS, LLC
(Registrant)
Date: July 8, 2011


By: /s/Stephen E. Hare                                                               
 
Stephen E. Hare
 
Senior Vice President and
 
Chief Financial Officer
 
 


4


Exhibit Index

EXHIBIT NO.
DESCRIPTION
2.1
Purchase and Sale Agreement, dated as of June 13, 2011, by and among Wendy’s/Arby’s Restaurants, LLC, ARG Holding Corporation and ARG IH Corporation, incorporated herein by reference to Exhibit 2.1 of the Wendy’s/Arby’s Group, Inc. and Wendy’s/Arby’s Restaurants, LLC Current Reports on Form 8-K filed on June 13, 2011 (SEC file nos. 001-02207 and 333-16161, respectively.)
2.2
99.1
99.2



5


EXHIBIT 2.2

    
ARG Holding Corporation
ARG IH Corporation
c/o Roark Capital Acquisition LLC
1180 Peachtree Street, N.E., Suite 2500
Atlanta, GA 30309

Wendy's/Arby's Restaurants, LLC
c/o Wendy's/Arby's Group, Inc.
1155 Perimeter Center West - 8th Floor
Atlanta, GA 30338

July 1, 2011

Re: Closing

Ladies and Gentlemen:
Reference is made to that certain Purchase and Sale Agreement, dated as of June 13, 2011 (as may be amended, restated or otherwise modified in accordance with its terms, the “ Purchase and Sale Agreement ”), by and among Wendy's/Arby's Restaurants, LLC, a Delaware limited liability company (“ Seller ”), ARG Holding Corporation, a Delaware corporation (“ Buyer Parent ”), and ARG IH Corporation, a Delaware corporation and a wholly-owned subsidiary of Buyer Parent (“ Buyer ”). Capitalized terms used herein and not otherwise defined herein shall have the meanings ascribed in the Purchase and Sale Agreement.
This letter shall confirm the agreement and understanding among Seller, Buyer Parent and Buyer that the Closing shall occur at 9:00 a.m. (New York City time) on July 4, 2011, subject to the satisfaction or waiver at or prior to such Closing of all of the conditions to the Closing set forth in Article VI of the Purchase and Sale Agreement, other than (i) Seller's obligations under Section 5.15 to (x) change its limited liability company name and (y) change the corporate or limited liability company name of any of its Subsidiaries (other than the Company Group), in each case, to exclude the word “Arby's” effective at, and conditional on, the Closing, (ii) Buyer Parent's and Buyer's obligations under Section 5.23(a) to cause an Acceptable Bank to issue for the benefit of each Existing Beneficiary, effective from and after the Closing, a Substitute L/C in a face amount equal to the then undrawn amount of each Outstanding L/C, (iii) Buyer Parent's and Buyer's obligations under Section 5.23(b) to cause the Acceptable Bank to issue for the benefit of Safeco Insurance Company a standby letter of credit in a face amount equal to $1,000,000 as contemplated by note 3 in Section 5.23 of the Seller Disclosure Letter on or prior to the Closing Date and (iv) Buyer Parent's and Buyer's obligations under Section 5.23(d) to cause an Acceptable Bank to issue for the benefit of Seller (or any Affiliate of Seller designated by Seller on or prior to Closing Date) a Standby L/C in a face amount equal to the undrawn amount of each Remaining L/C on the Closing Date. The Closing Date shall be July 4, 2011.



Wendy’s/Arby’s Restaurants, LLC
July 1, 2011
Page 2 of 4



Seller agrees and acknowledges that Buyer's obligation under Section 2.5(b)(i) of the Purchase and Sale Agreement shall be fulfilled by physical delivery by a representative of Buyer of two (2) cashier's checks, each issued by Silicon Valley Bank (which shall be drawn from Silicon Valley Bank's account, but be originally funded from Buyer's account) and made payable to “Wendy's/Arby's Restaurants, LLC”, for immediately available funds (each, a “ Closing Check ” and, together, the “ Closing Checks ”) (i) one of which shall be in the amount of $90,000,000.00, and (ii) the other shall be in the amount of $38,587,742.28, to a representative of Seller, instead of by way of wire transfer of immediately available funds. The aggregate amount of the Closing Checks is hereinafter referred to as the “ Final Closing Amount ”). For the avoidance of doubt, it is agreed and acknowledged that, as set forth in the funding certificate (the “ Funding Certificate ”) delivered by Seller to Buyer Parent and Buyer prior to the Closing (which includes the Estimated Adjustment Certificate and the Estimated Outstanding Gift Card Liability Certificate), the Final Closing Amount comprises the Preliminary Cash Consideration, as adjusted by items 5 through 8 set forth on such funding certificate. As soon as possible following the Closing Date (but in any event not later than 11:00 a.m. (New York City time) on July 5, 2011, Seller shall present the Closing Checks for deposit in its deposit account (“ Seller's Deposit Account ”) at Wells Fargo Bank, N.A. (“ Wells Fargo ”). Seller shall notify Buyer in writing promptly after each Closing Check has deposited to Seller's Deposit Account. If Seller's Deposit Account is not credited for the Final Closing Amount by 4:00 p.m. (New York City time) on July 7, 2011; provided, that Seller has presented the Closing Checks for deposit in Seller's Deposit Account on July 5, 2011, or if a Closing Check is otherwise not honored by Silicon Valley Bank upon presentment by Wells Fargo to Silicon Valley Bank (a “ Dishonored Check ”), then, promptly after Seller returns the Closing Checks or such Dishonored Check to Buyer, Buyer shall, and Buyer Parent shall cause Buyer to, pay the Final Closing Amount or the amount of such Dishonored Check, as the case may be, in immediately available funds by wire transfer (such wire transfer, the “ Alternative Wire Transfer ”) to an account or accounts to be designated by Seller to Buyer; provided , that if Seller is unable to return the Closing Checks or any Dishonored Check, Seller, Buyer Parent and Buyer shall cooperate with each other and use reasonable best efforts to cause Silicon Valley Bank to cancel or otherwise void the Closing Checks or such Dishonored Check, and upon such cancellation or voiding, Buyer shall, and Buyer Parent shall cause Buyer to, pay the Final Closing Amount or the amount of such Dishonored Check, as the case may be, in immediately available funds pursuant to the Alternative Wire Transfer. For the avoidance of doubt, it is agreed and acknowledged that Seller shall not be entitled under any circumstance to receive the Final Closing Amount more than once.
Buyer Parent agrees and acknowledges that any payment to Seller made pursuant to Section 2.7(b) of the Stockholders Agreement on July 5, 2011 shall be made by Buyer by means of a wire transfer of immediately available funds from Buyer's account to an account or accounts to be designated by Seller to Buyer.



Wendy’s/Arby’s Restaurants, LLC
July 1, 2011
Page 3 of 4



Buyer Parent and Buyer agree and acknowledge that Seller's obligation under Section 2.5(a)(vii) of the Purchase and Sale Agreement shall be fulfilled upon the delivery to Buyer of all of the documents described in such Section (other than the Third Amended and Restated Promissory Note, dated February 24, 2011, by AFA Service Corporation in favor of the Company in the aggregate principal amount of $11,000,000 (the “ AFA Note ”); provided , that , if Seller has not delivered, or caused to be delivered, to Buyer the original AFA Note on or before July 14, 2011, then Seller shall deliver, or cause to be delivered, to Buyer a lost note affidavit with respect to the AFA Note on or prior to July 17, 2011).
Buyer Parent and Buyer agree and acknowledge that the reimbursement amount of $96,515.93 in item 8 of the Funding Certificate represents fifty percent (50%) of the net proceeds received by the Company Group prior to the Closing with respect to the sale of the excess property described in items 2 and 22 of Section 5.1 of the Seller Disclosure Letter prior to the Closing (the “ Excess Real Property Sale ”), and, upon Buyer's payment to Seller of the Final Closing Amount, neither Buyer Parent nor Buyer shall have any claim against Seller with respect to the Excess Real Property Sale (including, for the avoidance of doubt, any claim pursuant to Section 8.2(a)(vi) of the Purchase and Sale Agreement).
As soon as possible following the Closing Date (but in any event not later than 1:00 p.m. (New York City time) on July 5, 2011), Seller shall (i) change its limited liability company name and (ii) change the corporate or limited liability company name of any of its Subsidiaries (which, for the avoidance of doubt, shall not at such time include the Company Group), in each case, to exclude the word “Arby's”.
As soon as possible following the Closing Date (but in any event not later than 2:30 p.m. (New York City time) on July 5, 2011), Buyer Parent and Buyer shall (i) cause an Acceptable Bank to issue for the benefit of each Existing Beneficiary, effective from and after the Closing, a Substitute L/C in a face amount equal to the then undrawn amount of each Outstanding L/C, (ii) cause the Acceptable Bank to issue for the benefit of Safeco Insurance Company a standby letter of credit in a face amount equal to $1,000,000 as contemplated by note 3 in Section 5.23 of the Seller Disclosure Letter and (iii) to cause an Acceptable Bank to issue for the benefit of Seller (or any Affiliate of Seller designated by Seller on or prior to Closing Date) a Standby L/C in a face amount equal to the undrawn amount of each Remaining L/C on the Closing Date.
Seller, Buyer Parent and Buyer agree that the terms of this letter agreement are supplemental to the terms of the Purchase and Sale Agreement and except as otherwise specified herein, the terms of the Purchase and Sale Agreement shall continue to be in full force and effect without amendment or modification. For purposes of this letter agreement, Seller, Buyer Parent and Buyer agree that time is of the essence.

[Signature page to follow]



Wendy’s/Arby’s Restaurants, LLC
July 1, 2011
Page 4 of 4




Very truly yours,
 
 
ARG HOLDING CORPORATION
 
 
By: /s/Stephen D. Aronson                        
Name:
Stephen D. Aronson
Title:
Authorized Signatory
 
 
 
 
ARG IH CORPORATION
 
 
By: /s/Stephen D. Aronson                        
Name:
Stephen D. Aronson
Title:
Authorized Signatory
 
 
 
 
ROARK CAPITAL PARTNERS II, LP
 
 
By: Roark Capital GenPar II, LLC
Its: General Partner
 
 
By: /s/Stephen D. Aronson                        
Name:
Stephen D. Aronson
Title:
Authorized Signatory


Accepted and Acknowledged as of
the date first written above:
WENDY’S/ARBY’S RESTAURANTS, LLC
 
 
By: /s/Stephen E. Hare                                        
Name:
Stephen E. Hare
Title:
Senior Vice President and
 
Chief Financial Officer







EXHIBIT 99.1

THE WENDY’S COMPANY AND SUBSIDIARIES
RECONCILIATION OF PRO FORMA EBITDA TO PRO FORMA INCOME FROM CONTINUING
OPERATIONS AND RECONCILIATION OF PRO FORMA EBITDA TO PRO FORMA ADJUSTED EBITDA


The following reconciliations of pro forma earnings before interest, taxes, depreciation and amortization (“EBITDA”) to both pro forma income from continuing operations and pro forma adjusted EBITDA are based on the unaudited pro forma condensed consolidated statements of operations of The Wendy’s Company (see Exhibit 99.2) which illustrate the effect of the sale by Wendy’s Restaurants, LLC (“Wendy’s Restaurants”) of 100% of the common stock of Arby’s Restaurant Group, Inc. (“Arby’s”) to ARG IH Corporation, a wholly-owned subsidiary of ARG Holding Corporation, for $130 million in cash (subject to customary purchase price adjustments) and 18.5% of the common stock of ARG Holding Corporation (through which Wendy’s Restaurants will indirectly retain an 18.5% interest in Arby’s).

The unaudited pro forma condensed consolidated statements of operations do not reflect future events that may occur after the sale, including potential general and administrative cost savings. The unaudited pro forma condensed consolidated statements of operations are provided for informational purposes only and are not necessarily indicative of the results of operations that would have occurred if the sale of Arby’s was consummated at the beginning of the 2010 or 2011 fiscal years nor are they necessarily indicative of future operating results, or of pro forma EBITDA or pro forma adjusted EBITDA. The pro forma adjustments included in the pro forma condensed consolidated statements of operations are subject to change and are based upon currently available information.

The Wendy’s Company believes that pro forma EBITDA and pro forma adjusted EBITDA will allow investors to better understand operating results for the periods presented in the unaudited pro forma condensed consolidated statements of operations set forth in Exhibit 99.2 of this Current Report on Form 8-K. Pro forma EBITDA and pro forma adjusted EBITDA are not recognized terms under U.S. Generally Accepted Accounting Principles (“GAAP”). Because all companies do not calculate pro forma EBITDA or similarly titled financial measures in the same way, those measures as used by other companies may not be consistent with the way The Wendy’s Company calculates such measures and should not be considered as alternative measures of pro forma operating profit or pro forma income from continuing operations.

The presentations of pro forma EBITDA and pro forma adjusted EBITDA are not intended to replace the presentation of pro forma financial results in accordance with GAAP.


1




RECONCILIATION OF PRO FORMA EBITDA TO PRO FORMA INCOME FROM CONTINUING OPERATIONS
 
 
 
 
 
 
 
 






(In Thousands)

Three Months Ended

Year Ended
 

April 3, 2011

April 4, 2010

January 2, 2011
(Unaudited)






 Pro forma EBITDA (1)

$
66,920


$
70,154


$
303,919

 Depreciation and amortization

(30,314
)

(32,432
)

(126,846
)
 Impairment of long-lived assets

(7,897
)

—


(26,326
)
Pro forma operating profit
 
28,709

 
37,722

 
150,747

 Interest expense

(29,414
)

(31,011
)

(118,207
)
 Loss on early extinguishment of debt

—


—


(26,197
)
 Investment income, net

—


—


5,261

 Other income, net

254


1,196


2,432

Pro forma (loss) income from continuing operations
     before income taxes
 
(451
)
 
7,907

 
14,036

 Benefit from (provision for) income taxes

485


(476
)

3,828

Pro forma income from continuing operations
 
$
34

 
$
7,431

 
$
17,864

 






 






 






RECONCILIATION OF PRO FORMA EBITDA TO PRO FORMA ADJUSTED EBITDA
 
 
 
 
 
 
 
 






(In Thousands)

Three Months Ended

Year Ended
 

April 3, 2011

April 4, 2010

January 2, 2011
(Unaudited)






Pro forma EBITDA (1)

$
66,920


$
70,154


$
303,919

Plus:






Arby’s indirect corporate overhead in general and
     administrative (G&A) (2)

7,613


9,586


32,326

Integration costs in G&A (3)

—


2,026


3,997

Arby’s strategic alternative costs in G&A (4)

2,012


—


—

SSG purchasing cooperative expenses in G&A (3)

(1,592
)

3,430


3,601

Reversal of pension withdrawal expense in
     cost of sales

—


—


(4,975
)
 Pro forma Adjusted EBITDA (5)

$
74,953

 
$
85,196

 
$
338,868



2


Notes to Reconciliation of Pro Forma EBITDA to Pro Forma Adjusted EBITDA

In exhibits to two Current Reports on Form 8-K dated May 10, 2011, The Wendy’s Company (formerly known as Wendy’s/Arby’s Group, Inc.) had presented pro forma adjusted EBITDA for the three months ended April 3, 2011 which was based on the historical condensed consolidated statements of operations and assumed a sale of Arby’s Restaurant Group, Inc. (“Arby’s”) as of the beginning of fiscal 2011. In this Current Report on Form 8-K, The Wendy’s Company is including pro forma adjusted EBITDA for the three months ended April 3, 2011 and April 4, 2010 and for the year ended January 2, 2011 prepared on the basis described below.    

(1)
Pro Forma EBITDA is presented in the table above and is derived from and reconciled to the unaudited pro forma condensed consolidated statements of operations included in Exhibit 99.2.     

(2)
Includes certain indirect corporate overhead costs reported in “General and administrative” which, for segment reporting purposes prior to Arby’s being included in discontinued operations, had been allocated to Arby’s.     

(3)
Includes expenses related to integrating Wendy’s and Arby’s incurred by The Wendy’s Company, as well as the allocation to The Wendy’s Company of certain indirect corporate overhead costs also related to such integration.

(4)
Includes costs related to evaluating strategic alternatives for Arby’s reported in “General and administrative” as reduced by $370 of legal fees included in discontinued operations.    

(5)
Does not contain an adjustment for incremental advertising costs for Wendy’s International, Inc.’s new breakfast program of $7,192 which adjustment was made to adjusted EBITDA as shown in the reconciliation of EBITDA to adjusted EBITDA for the year ended January 2, 2011 in exhibits to two Current Reports on Form 8-K dated March 3, 2011.


3
EXHIBIT 99.2

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION

The following unaudited pro forma condensed consolidated balance sheets and statements of operations are based upon the historical consolidated financial statements of The Wendy’s Company (“The Wendy’s Company” or the “Company”) (formerly known as Wendy’s/Arby’s Group, Inc.) and Wendy’s Restaurants, LLC (“Wendy’s Restaurants”) (formerly known as (Wendy’s/Arby’s Restaurants, LLC), a 100% owned subsidiary of The Wendy’s Company. Unless the context indicates otherwise, any reference in this report to the “Companies,” “we,” “us,” and “our” refers to The Wendy’s Company together with its direct and indirect subsidiaries, including Wendy’s Restaurants. The unaudited pro forma condensed consolidated financial statements have been prepared to illustrate the effect of the sale by Wendy’s Restaurants of 100% of the common stock of Arby’s Restaurant Group, Inc. (“Arby’s”) to ARG IH Corporation, a wholly-owned subsidiary of ARG Holding Corporation, for $130 million in cash (subject to customary purchase price adjustments) and 18.5% of the common stock of ARG Holding Corporation (through which Wendy’s Restaurants will indirectly retain an 18.5% interest in Arby’s).

The unaudited pro forma condensed consolidated balance sheets as of April 3, 2011 reflect the pro forma effect as if the sale of Arby’s had been consummated on that date. The unaudited pro forma condensed consolidated statements of operations for the three months ended April 3, 2011 and April 4, 2010 and the years ended January 2, 2011, January 3, 2010, December 28, 2008 include each entity’s historical statements of operations, adjusted to reflect the pro forma effect as if the sale of Arby’s had been consummated on December 31, 2007 (the first day of our 2008 fiscal year). The historical consolidated financial statements referred to above for The Wendy’s Company and Wendy’s Restaurants were included in their combined Quarterly Report on Form 10-Q for the quarter ended April 3, 2011 and combined Annual Report on Form 10-K for the year ended January 2, 2011. The accompanying unaudited pro forma condensed consolidated financial information and the historical consolidated financial information presented therein should be read in conjunction with the historical consolidated financial statements and combined notes thereto for The Wendy’s Company and Wendy’s Restaurants described above.

The unaudited pro forma condensed consolidated balance sheets and statements of operations include pro forma adjustments which reflect transactions and events that (a) are directly attributable to the sale, (b) are factually supportable, and (c) with respect to the statement of operations, do not have a continuing impact on consolidated results. The pro forma adjustments are described in the accompanying combined notes to the unaudited pro forma condensed consolidated financial statements.

The Wendy’s Company and Wendy’s Restaurants management have made a preliminary determination of the value of the common stock we received in ARG Holding Corporation. The ultimate amount recorded for the value of this common stock may differ from the amount presented.

The unaudited pro forma condensed consolidated financial information does not reflect future events that may occur after the sale, including potential general and administrative cost savings. The unaudited pro forma condensed consolidated financial information is provided for informational purposes only and is not necessarily indicative of the results of operations that would have occurred if the sale of Arby’s had occurred on December 31, 2007 nor is it necessarily indicative of our future operating results. The pro forma adjustments are subject to change and are based upon currently available information.



1
THE WENDY’S COMPANY AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
April 3, 2011
(In Thousands)
 
 
 
Pro Forma Adjustments
 
 
 
 Historical
 
Sale of Arby's (a)
 
Other
 
Pro Forma
ASSETS
 
 
 
 
 
 
 
Current assets:
 
 
 
 
 
 
 
Cash and cash equivalents
$
500,061

 
$
(51,666
)
 
$
44,166

(b)
$
622,561

 
 
 
 
 
130,000

(d)
 
Accounts and notes receivable
84,623

 
(20,392
)
 
—

 
64,231

Inventories
23,112

 
(10,336
)
 
—

 
12,776

Prepaid expenses and other current assets
53,783

 
(17,783
)
 
—

 
36,000

Deferred income tax benefit
54,996

 
(6,292
)
 
—

 
48,704

Advertising funds restricted assets
85,478

 
(12,132
)
 
—

 
73,346

Total current assets
802,053

 
(118,601
)
 
174,166

 
857,618

Properties
1,519,962

 
(373,149
)
 
—

 
1,146,813

Other intangible assets
1,351,418

 
(25,430
)
 
—

 
1,325,988

Goodwill
888,095

 
(17,617
)
 
—

 
870,478

Investments
109,941

 
—

 
19,000

(d)
128,941

Deferred costs and other assets
69,272

 
(4,706
)
 
—

 
64,566

Total assets
$
4,740,741

 
$
(539,503
)
 
$
193,166

 
$
4,394,404

 
 
 
 
 
 
 
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
 
 
 

Current liabilities:
 

 
 
 
 
 
 

Current portion of long-term debt
$
17,350

 
$
(9,910
)
 
$
—

 
$
7,440

Accounts payable
68,745

 
(21,032
)
 
—

 
47,713

Accrued expenses and other current liabilities
240,519

 
(66,091
)
 
12,300

(d)
202,538

 
 
 
 
 
9,543

(e)


 
 
 
 
 
6,500

(f)
 
 
 
 
 
 
(233
)
(g)
 
Advertising funds restricted liabilities
85,478

 
(12,132
)
 
—

 
73,346

Total current liabilities
412,092

 
(109,165
)
 
28,110

 
331,037

Long-term debt
1,526,674

 
(183,097
)
 
—

 
1,343,577

Due to affiliates
—

 
(9,996
)
 
44,166

(b)
—

 
 
 


 
(34,170
)
(c)
 
Deferred income
39,745

 
(14,400
)
 
—

 
25,345

Deferred income taxes
430,189

 
(6,219
)
 
—

 
423,970

Other liabilities
164,928

 
(56,619
)
 
—

 
108,309

Commitments and contingencies


 


 
 
 
 
Stockholders’ equity
2,167,113

 
(160,007
)
 
34,170

(c)
2,162,166

 
 
 
 
 
136,700

(d)
 
 
 
 
 
 
(9,543
)
(e)
 
 
 
 
 
 
(6,500
)
(f)
 
 
 
 
 
 
233

(g)
 
Total liabilities and stockholders’ equity
$
4,740,741

 
$
(539,503
)
 
$
193,166

 
$
4,394,404


See accompanying notes to unaudited pro forma condensed consolidated financial statements.

2
THE WENDY’S COMPANY AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands Except Per Share Amounts)


 
 
Three Months Ended April 3, 2011
 
Three Months Ended April 4, 2010
 
 
 
 
Pro Forma Adjustments
 
 
 
 
 
Pro Forma Adjustments
 
 
 
 
Historical
 
Sale of Arby's (a)
 
Other
 
Pro Forma
 
Historical
 
Sale of Arby's (a)
 
Other
 
Pro Forma
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Sales
 
$
756,496

 
$
(247,210
)
 
$
—

 
$
509,286

 
$
748,197

 
$
(235,450
)
 
$
—

 
$
512,747

Franchise revenues
 
91,328

 
(18,149
)
 
—

 
73,179

 
89,250

 
(17,283
)
 
—

 
71,967

 
 
847,824

 
(265,359
)
 
—

 
582,465

 
837,447

 
(252,733
)
 
—

 
584,714

Costs and expenses:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cost of sales
 
659,788

 
(220,966
)
 
—

 
438,822

 
641,422

 
(210,085
)
 
—

 
431,337

General and administrative (1)
 
103,627

 
(27,331
)
 
(370
)
(g)
75,926

 
110,482

 
(28,203
)
 
—

 
82,279

Depreciation and amortization
 
43,125

 
(12,811
)
 
—

 
30,314

 
46,326

 
(13,894
)
 
—

 
32,432

Impairment of long-lived assets
 
9,612

 
(1,715
)
 
—

 
7,897

 
11,601

 
(11,601
)
 
—

 
—

Other operating expense, net
 
1,032

 
(235
)
 
—

 
797

 
1,283

 
(339
)
 
—

 
944

 
 
817,184

 
(263,058
)
 
(370
)
 
553,756

 
811,114

 
(264,122
)
 
—

 
546,992

Operating profit
 
30,640

 
(2,301
)
 
370

 
28,709

 
26,333

 
11,389

 
—

 
37,722

Interest expense
 
(34,328
)
 
4,914

 
—

 
(29,414
)
 
(36,278
)
 
5,267

 
—

 
(31,011
)
Other income, net
 
323

 
(69
)
 
—

 
254

 
1,408

 
(212
)
 
—

 
1,196

(Loss) income from continuing
    operations before income
    taxes
 
(3,365
)
 
2,544

 
370

 
(451
)
 
(8,537
)
 
16,444

 
—

 
7,907

Benefit from (provision for)
    income taxes
 
1,956

 
509

 
(137
)
(g)
485

 
5,137

 
779

 
(6,392
)
(h)
(476
)
 
 
 
 
 
 
(1,843
)
(h)
 
 
 
 
 
 
 
 
 
(Loss) income from
    continuing operations
 
$
(1,409
)
 
$
3,053

 
$
(1,610
)
 
$
34

 
$
(3,400
)
 
$
17,223

 
$
(6,392
)
 
$
7,431


(1)  
General and administrative for the three months ended April 3, 2011 includes $2,012 in Arby's strategic alternatives costs for employee retention and other professional fees.

3
THE WENDY’S COMPANY AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands Except Per Share Amounts)

 
 
Three Months Ended April 3, 2011
 
Three Months Ended April 4, 2010
 
 
 
 
Pro Forma Adjustments
 
 
 
 
 
Pro Forma Adjustments
 
 
 
 
Historical
 
Sale of Arby's (a)
 
Other
 
Pro Forma
 
Historical
 
Sale of Arby's (a)
 
Other
 
Pro Forma
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic (loss) income from
    continuing operations per share:
 
$ .00

 
 
 
 
 
$ .00

 
$
(.01
)
 
 
 
 
 
$
.02

Diluted (loss) income from
    continuing operations per share:
 
$ .00

 
 
 
 
 
$ .00

 
$
(.01
)
 
 
 
 
 
$
.02

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted average number of basic
    shares outstanding:
 
418,520

 
 
 
 
 
418,520

 
443,326

 
 
 
 
 
443,326

Weighted average number of
    diluted shares outstanding:
 
418,520

 
 
 
 
 
419,591

 
443,326

 
 
 
 
 
444,502



See accompanying notes to unaudited pro forma condensed consolidated financial statements.

4


THE WENDY’S COMPANY AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
Year Ended January 2, 2011
(In Thousands Except Per Share Amounts)


 
 
 
Pro Forma Adjustments
 
 
 
Historical
 
Sale of Arby's (a)
 
Other
 
Pro Forma
Revenues:
 
 
 
 
 
 
 
Sales
$
3,045,317

 
$
(966,236
)
 
$
—

 
$
2,079,081

Franchise revenues
371,097

 
(74,739
)
 
—

 
296,358

 
3,416,414

 
(1,040,975
)
 
—

 
2,375,439

Costs and expenses:
 
 
 
 
 
 
 
Cost of sales
2,610,761

 
(853,863
)
 
—

 
1,756,898

General and administrative
416,606

 
(105,341
)
 
—

 
311,265

Depreciation and amortization
182,172

 
(55,326
)
 
—

 
126,846

Impairment of long-lived assets
69,477

 
(43,151
)
 
—

 
26,326

Other operating expense, net
5,010

 
(1,653
)
 
—

 
3,357

 
3,284,026

 
(1,059,334
)
 
—

 
2,224,692

Operating profit
132,388

 
18,359

 
—

 
150,747

Interest expense
(137,229
)
 
19,022

 
—

 
(118,207
)
Loss on early extinuishment of debt
(26,197
)
 
—

 
—

 
(26,197
)
Investment income, net
5,261

 
—

 
—

 
5,261

Other income, net
3,782

 
(1,350
)
 
—

 
2,432

(Loss) income from continuing operations before
    income taxes
(21,995
)
 
36,031

 
—

 
14,036

Benefit from income taxes
17,670

 
(732
)
 
(13,110
)
(h)
3,828

(Loss) income from continuing operations
$
(4,325
)
 
$
35,299

 
$
(13,110
)
 
$
17,864

 
 
 
 
 
 
 
 
Basic (loss) income from continuing operations
     per share:
$
(.01
)
 
 
 
 
 
$
.04

Diluted (loss) income from continuing operations
     per share:
$
(.01
)
 
 
 
 
 
$
.04

 
 
 
 
 
 
 
 
Weighted average number of basic shares outstanding:
426,247

 
 
 
 
 
426,247

Weighted average number of diluted shares outstanding:
426,247

 
 
 
 
 
427,195


See accompanying notes to unaudited pro forma condensed consolidated financial statements.


5

THE WENDY’S COMPANY AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
Year Ended January 3, 2010
(In Thousands Except Per Share Amounts)


 
 
 
Pro Forma Adjustments
 
 
 
Historical
 
Sale of Arby's (a)
 
Other
 
Pro Forma
Revenues:
 
 
 
 
 
 
 
Sales
$
3,198,348

 
$
(1,064,106
)
 
$
—

 
$
2,134,242

Franchise revenues
382,487

 
(79,634
)
 
—

 
302,853

 
3,580,835

 
(1,143,740
)
 
—

 
2,437,095

Costs and expenses:
 
 
 
 
 
 
 
Cost of sales
2,728,484

 
(916,428
)
 
—

 
1,812,056

General and administrative
452,713

 
(99,767
)
 
—

 
352,946

Depreciation and amortization
190,251

 
(56,188
)
 
—

 
134,063

Impairment of long-lived assets
82,132

 
(56,513
)
 
—

 
25,619

Facilities relocation and restructuring
11,024

 
—

 
—

 
11,024

Other operating expense, net
4,255

 
(714
)
 
—

 
3,541

 
3,468,859

 
(1,129,610
)
 
—

 
2,339,249

Operating profit
111,976

 
(14,130
)
 
—

 
97,846

Interest expense
(126,708
)
 
20,107

 
—

 
(106,601
)
Investment expense, net
(3,008
)
 
—

 
—

 
(3,008
)
Other than temporary losses on investments
(3,916
)
 
—

 
—

 
(3,916
)
Other expense (income), net
1,523

 
(1,628
)
 
—

 
(105
)
Loss from continuing operations before
    income taxes
(20,133
)
 
4,349

 
—

 
(15,784
)
Benefit from income taxes
23,649

 
60,640

 
(62,155
)
(h)
22,134

Income from continuing operations
$
3,516

 
$
64,989

 
$
(62,155
)
 
$
6,350

 
 
 
 
 
 
 
 
Basic income from continuing operations per share:
$
.01

 
 
 
 
 
$
.01

Diluted income from continuing operations per share:
$
.01

 
 
 
 
 
$
.01

 
 
 
 
 
 
 
 
Weighted average number of basic shares outstanding:
466,204

 
 
 
 
 
466,204

Weighted average number of diluted shares
     outstanding:
466,687

 
 
 
 
 
466,687


See accompanying notes to unaudited pro forma condensed consolidated financial statements.


6


THE WENDY’S COMPANY AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
Year Ended December 28, 2008
(In Thousands Except Per Share Amounts)


 
Historical
 
Sale of Arby's (a)
 
Pro Forma
Revenues:
 
 
 
 
 
Sales
$
1,662,291

 
$
(1,131,448
)
 
$
530,843

Franchise revenues
160,470

 
(85,882
)
 
74,588

 
1,822,761

 
(1,217,330
)
 
605,431

Costs and expenses:
 
 
 
 
 
Cost of sales
1,415,534

 
(949,683
)
 
465,851

General and administrative
248,718

 
(119,560
)
 
129,158

Depreciation and amortization
88,315

 
(61,206
)
 
27,109

Goodwill impairment
460,075

 
(460,075
)
 
—

Impairment of long-lived assets
19,203

 
(8,002
)
 
11,201

Facilities relocation and restructuring
3,913

 
—

 
3,913

Other operating expense, net
653

 
(46
)
 
607

 
2,236,411

 
(1,598,572
)
 
637,839

Operating loss
(413,650
)
 
381,242

 
(32,408
)
Interest expense
(67,009
)
 
19,462

 
(47,547
)
Investment income, net
9,438

 
—

 
9,438

Other than temporary losses on investments
(112,741
)
 
—

 
(112,741
)
Other income (expense), net
2,710

 
(694
)
 
2,016

Loss from continuing operations before income
     taxes
(581,252
)
 
400,010

 
(181,242
)
Benefit from income taxes
99,294

 
(46,013
)
 
53,281

Loss from continuing operations
$
(481,958
)
 
$
353,997

 
$
(127,961
)
 
 
 
 
 
 
Basic and diluted loss from continuing operations
     per share:
 
 
 
 
 
Common Stock
$
(3.06
)
 
 
 
$
(.81
)
Class B common stock
$
(1.26
)
 
 
 
$
(.33
)
 
 
 
 
 
 
Weighted average number of basic and diluted shares
     outstanding:
 
 
 
 
 
Common Stock
137,669

 
 
 
137,669

Class B common stock
47,965

 
 
 
47,965


See accompanying notes to unaudited pro forma condensed consolidated financial statements.




7

WENDY’S RESTAURANTS, LLC AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
April 3, 2011
(In Thousands)
 
 
 
Pro Forma Adjustments
 
 
 
 Historical
 
Sale of Arby's (a)
 
Other
 
Pro Forma
ASSETS
 
 
 
 
 
 
 
Current assets:
 
 
 
 
 
 
 
Cash and cash equivalents
$
181,300

 
$
(51,666
)
 
$
44,166

(b)
$
303,800

 
 
 
 
 
130,000

(d)
 
Accounts and notes receivable
83,854

 
(20,392
)
 
—

 
63,462

Inventories
23,112

 
(10,336
)
 
—

 
12,776

Prepaid expenses and other current assets
52,922

 
(17,783
)
 
—

 
35,139

Deferred income tax benefit
43,274

 
(6,292
)
 
—

 
36,982

Advertising funds restricted assets
85,478

 
(12,132
)
 
—

 
73,346

Total current assets
469,940

 
(118,601
)
 
174,166

 
525,505

Properties
1,511,019

 
(373,149
)
 
—

 
1,137,870

Other intangible assets
1,351,418

 
(25,430
)
 
—

 
1,325,988

Goodwill
893,372

 
(17,617
)
 
—

 
875,755

Investments
105,121

 
—

 
19,000

(d)
124,121

Deferred costs and other assets
68,339

 
(4,706
)
 
—

 
63,633

Total assets
$
4,399,209

 
$
(539,503
)
 
$
193,166

 
$
4,052,872

 
 
 
 
 
 
 
 
LIABILITIES AND INVESTED EQUITY
 
 
 
 
 
 
 

Current liabilities:
 

 
 
 
 
 
 

Current portion of long-term debt
$
16,072

 
$
(9,910
)
 
$
—

 
$
6,162

Accounts payable
67,912

 
(21,032
)
 
—

 
46,880

Accrued expenses and other current liabilities
239,574

 
(66,091
)
 
12,300

(d)
201,593

 
 
 
 
 
9,543

(e)


 
 
 
 
 
6,500

(f)
 
 
 
 
 
 
(233
)
(g)
 
Advertising funds restricted liabilities
85,478

 
(12,132
)
 
—

 
73,346

Total current liabilities
409,036

 
(109,165
)
 
28,110

 
327,981

Long-term debt
1,515,728

 
(183,097
)
 
—

 
1,332,631

Due to The Wendy’s Company
17,486

 
(9,996
)
 
44,166

(b)
17,486

 
 
 
 
 
(34,170
)
(c)
 
Deferred income
39,745

 
(14,400
)
 
—

 
25,345

Deferred income taxes
476,526

 
(6,219
)
 
—

 
470,307

Other liabilities
152,440

 
(56,619
)
 
—

 
95,821

Commitments and contingencies
 
 
 
 
 
 
 
Invested equity
1,788,248

 
(160,007
)
 
34,170

(c)
1,783,301

 
 
 
 
 
136,700

(d)
 
 
 
 
 
 
(9,543
)
(e)
 
 
 
 
 
 
(6,500
)
(f)
 
 
 
 
 
 
233

(g)
 
Total liabilities and invested equity
$
4,399,209

 
$
(539,503
)
 
$
193,166

 
$
4,052,872


See accompanying notes to unaudited pro forma condensed consolidated financial statements.

8

WENDY’S RESTAURANTS, LLC AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands)

 
Three Months Ended April 3, 2011
 
Three Months Ended April 4, 2010
 
 
 
Pro Forma Adjustments
 
 
 
 
 
Pro Forma Adjustments
 
 
 
Historical
 
Sale of Arby's (a)
 
Other
 
Pro Forma
 
Historical
 
Sale of Arby's (a)
 
Other
 
Pro Forma
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Sales
$
756,496

 
$
(247,210
)
 
$
—

 
$
509,286

 
$
748,197

 
$
(235,450
)
 
$
—

 
$
512,747

Franchise revenues
91,328

 
(18,149
)
 
—

 
73,179

 
89,250

 
(17,283
)
 
—

 
71,967

 
847,824

 
(265,359
)
 
—

 
582,465

 
837,447

 
(252,733
)
 
—

 
584,714

Costs and expenses:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cost of sales
659,788

 
(220,966
)
 
—

 
438,822

 
641,422

 
(210,085
)
 
—

 
431,337

General and administrative (1)
100,276

 
(27,331
)
 
(370
)
(g)
72,575

 
108,760

 
(28,203
)
 
—

 
80,557

Depreciation and amortization
42,660

 
(12,811
)
 
—

 
29,849

 
45,860

 
(13,894
)
 
—

 
31,966

Impairment of long-lived assets
9,612

 
(1,715
)
 
—

 
7,897

 
11,601

 
(11,601
)
 
—

 
—

Other operating expense, net
977

 
(235
)
 
—

 
742

 
1,550

 
(339
)
 
—

 
1,211

 
813,313

 
(263,058
)
 
(370
)
 
549,885

 
809,193

 
(264,122
)
 
—

 
545,071

Operating profit
34,511

 
(2,301
)
 
370

 
32,580

 
28,254

 
11,389

 
—

 
39,643

Interest expense
(34,101
)
 
4,914

 
—

 
(29,187
)
 
(35,939
)
 
5,267

 
—

 
(30,672
)
Other income, net
283

 
(69
)
 
—

 
214

 
495

 
(212
)
 
—

 
283

Income (loss) from continuing
    operations before income
    taxes
693

 
2,544

 
370

 
3,607

 
(7,190
)
 
16,444

 
—

 
9,254

Benefit from (provision for)
    income taxes
332

 
509

 
(137
)
(g)
(970
)
 
4,630

 
779

 
(6,363
)
(h)
(954
)
 
 
 
 
 
(1,674
)
(h)
 
 
 
 
 
 
 
 
 
Income (loss) from continuing
     operations
$
1,025

 
$
3,053

 
$
(1,441
)
 
$
2,637

 
$
(2,560
)
 
$
17,223

 
$
(6,363
)
 
$
8,300


(1)  
General and administrative for the three months ended April 3, 2011 includes $2,012 in Arby's strategic alternatives costs for employee retention and other professional fees.

See accompanying notes to unaudited pro forma condensed consolidated financial statements.

9

WENDY’S RESTAURANTS, LLC AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
Year Ended January 2, 2011
(In Thousands)


 
 
 
Pro Forma Adjustments
 
 
 
Historical
 
Sale of Arby's (a)
 
Other
 
Pro Forma
Revenues:
 
 
 
 
 
 
 
Sales
$
3,045,317

 
$
(966,236
)
 
$
—

 
$
2,079,081

Franchise revenues
371,097

 
(74,739
)
 
—

 
296,358

 
3,416,414

 
(1,040,975
)
 
—

 
2,375,439

Costs and expenses:
 
 
 
 
 
 
 
Cost of sales
2,610,761

 
(853,863
)
 
—

 
1,756,898

General and administrative
408,419

 
(105,341
)
 
—

 
303,078

Depreciation and amortization
180,310

 
(55,326
)
 
—

 
124,984

Impairment of long-lived assets
69,477

 
(43,151
)
 
—

 
26,326

Other operating expense, net
5,147

 
(1,653
)
 
—

 
3,494

 
3,274,114

 
(1,059,334
)
 
—

 
2,214,780

Operating profit
142,300

 
18,359

 
—

 
160,659

Interest expense
(136,193
)
 
19,022

 
—

 
(117,171
)
Loss on early extinguishment of debt
(26,197
)
 
—

 
—

 
(26,197
)
Other income, net
2,667

 
(1,350
)
 
—

 
1,317

(Loss) income from continuing operations before
    income taxes
(17,423
)
 
36,031

 
—

 
18,608

Benefit from income taxes
14,785

 
(732
)
 
(13,833
)
(h)
220

(Loss) income from continuing operations
$
(2,638
)
 
$
35,299

 
$
(13,833
)
 
$
18,828


See accompanying notes to unaudited pro forma condensed consolidated financial statements.


10

WENDY’S RESTAURANTS, LLC AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
Year Ended January 3, 2010
(In Thousands)


 
 
 
Pro Forma Adjustments
 
 
 
Historical
 
Sale of Arby's (a)
 
Other
 
Pro Forma
Revenues:
 
 
 
 
 
 
 
Sales
$
3,198,348

 
$
(1,064,106
)
 
$
—

 
$
2,134,242

Franchise revenues
382,487

 
(79,634
)
 
—

 
302,853

 
3,580,835

 
(1,143,740
)
 
—

 
2,437,095

Costs and expenses:
 
 
 
 
 
 
 
Cost of sales
2,728,480

 
(916,428
)
 
—

 
1,812,052

General and administrative
442,686

 
(99,767
)
 
—

 
342,919

Depreciation and amortization
188,506

 
(56,188
)
 
—

 
132,318

Impairment of long-lived assets
79,956

 
(56,513
)
 
—

 
23,443

Facilities relocation and restructuring
8,016

 
—

 
—

 
8,016

Other operating expense, net
3,239

 
(714
)
 
—

 
2,525

 
3,450,883

 
(1,129,610
)
 
—

 
2,321,273

Operating profit
129,952

 
(14,130
)
 
—

 
115,822

Interest expense
(125,392
)
 
20,107

 
—

 
(105,285
)
Other expense, net
(2,973
)
 
(1,628
)
 
—

 
(4,601
)
Income from continuing operations before income
     taxes
1,587

 
4,349

 
—

 
5,936

Benefit from income taxes
8,062

 
60,640

 
(62,155
)
(h)
6,547

Income from continuing operations
$
9,649

 
$
64,989

 
$
(62,155
)
 
$
12,483


See accompanying notes to unaudited pro forma condensed consolidated financial statements.


11

WENDY’S RESTAURANTS, LLC AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
Year Ended December 28, 2008
(In Thousands)


 
Historical
 
Sale of Arby's (a)
 
Pro Forma
Revenues:
 
 
 
 
 
Sales
$
1,662,291

 
$
(1,131,448
)
 
$
530,843

Franchise revenues
160,470

 
(85,882
)
 
74,588

 
1,822,761

 
(1,217,330
)
 
605,431

Costs and expenses:
 
 
 
 
 
Cost of sales
1,415,530

 
(949,683
)
 
465,847

General and administrative
213,161

 
(119,560
)
 
93,601

Depreciation and amortization
85,058

 
(61,206
)
 
23,852

Goodwill impairment
460,075

 
(460,075
)
 
—

Impairment of long-lived assets
9,580

 
(8,002
)
 
1,578

Facilities relocation and restructuring
3,221

 
—

 
3,221

Other operating expense, net
652

 
(46
)
 
606

 
2,187,277

 
(1,598,572
)
 
588,705

Operating (loss) profit
(364,516
)
 
381,242

 
16,726

Interest expense
(66,925
)
 
19,462

 
(47,463
)
Other income (expense), net
3,234

 
(694
)
 
2,540

Loss from continuing operations before
    income taxes
(428,207
)
 
400,010

 
(28,197
)
Benefit from income taxes
63,121

 
(46,013
)
 
17,108

Loss from continuing operations
$
(365,086
)
 
$
353,997

 
$
(11,089
)

See accompanying notes to unaudited pro forma condensed consolidated financial statements.


12

THE WENDY’S COMPANY AND SUBSIDIARIES
WENDY’S RESTAURANTS, LLC AND SUBSIDIARIES
COMBINED NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(In Thousands)


Description of Transaction and Basis of Presentation

The unaudited pro forma condensed consolidated balance sheets and statements of operations are based upon the historical consolidated financial statements of The Wendy’s Company (“The Wendy’s Company” or the “Company”) (formerly known as Wendy’s/Arby’s Group, Inc.) and Wendy’s Restaurants, LLC (“Wendy’s Restaurants”) (formerly known as Wendy’s/Arby’s Restaurants, LLC), a 100% owned subsidiary of The Wendy’s Company, which were included in their combined Quarterly Report on Form 10-Q for the quarter ended April 3, 2011 and combined Annual Report on Form 10-K for the year ended January 2, 2011. Unless the context indicates otherwise, any reference in this report to the “Companies,” “we,” “us,” and “our” refers to The Wendy’s Company together with its direct and indirect subsidiaries, including Wendy’s Restaurants. The unaudited pro forma condensed consolidated statements of operations reflect the sale of Arby’s Restaurant Group, Inc. (“Arby’s”) as if the sale had been consummated on December 31, 2007 (the first day of our 2008 fiscal year). The unaudited pro forma condensed consolidated balance sheets as of April 3, 2011 reflect such sale as if it had been consummated on that date.

Pro Forma Adjustments

On July 4, 2011, Wendy’s Restaurants completed the sale of 100% of the common stock of Arby’s to ARG IH Corporation (“Buyer”), a wholly-owned subsidiary of ARG Holding Corporation (“Buyer Parent”), for $130 million in cash (subject to customary purchase price adjustments) and 18.5% of the common stock of Buyer Parent (through which Wendy’s Restaurants will indirectly retain an 18.5% interest in Arby’s). The sale occurred pursuant to the terms of the Purchase and Sale Agreement by and among Wendy’s Restaurants, Buyer Parent and Buyer dated as of June 13, 2011.
The following pro forma adjustments are included in the unaudited pro forma condensed consolidated balance sheet and/or the unaudited pro forma condensed consolidated statements of operations:

(a)
The elimination of Arby’s historical assets, liabilities and equity, and revenues and expenses.

In accordance with generally accepted accounting principles in the United States, the amounts eliminated on the unaudited pro forma condensed consolidated statements of operations do not include certain indirect corporate overhead included in “General and administrative,” which for segment reporting purposes, had been allocated to Arby’s. In addition, interest expense on Arby’s debt that has been assumed by Buyer has been eliminated; interest expense on the prior Arby’s credit agreement that has not been assumed by Buyer or that is not required to be repaid as a result of the sale has not been eliminated and is included in “Interest expense.”

Certain tax liabilities of Arby’s, including related interest and penalties, are being retained by Wendy’s Restaurants and therefore have not been eliminated from the Companies’ historical balance sheet accounts.

In accordance with Securities and Exchange Commission guidance, the pro forma condensed consolidated statements of operations do not assume any interest income on the estimated net cash proceeds from the sale transaction.

(b)
Excess cash and cash equivalents over an agreed upon amount as of the closing date of the sale transaction, which was transferred from Arby’s to Wendy’s Restaurants.

(c)
Dividend from Arby’s to Wendy’s Restaurants in settlement of its intercompany account.

13

THE WENDY’S COMPANY AND SUBSIDIARIES
WENDY’S RESTAURANTS, LLC AND SUBSIDIARIES
COMBINED NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(In Thousands)


(d)
The proceeds, net of related transaction costs, and the resulting net gain on the sale of Arby’s as summarized below:
 
Cash portion of sale price before customary price adjustments
 
 
 
 
 
$
130,000

 
 
Preliminary estimated common stock value (i)
 
 
 
 
 
19,000

 
 
Total proceeds
 
 
 
 
 
149,000

 
 
Accrued expenses: (see “Nonrecurring and Other Costs” below)
 
 
 
 
 
 
 
 
Transaction costs
 
 
 
 
 
(12,300
)
 
 
Net proceeds
 
 
 
 
 
136,700

 
 
Net assets sold (ii)
 
 
 
 
 
(125,837
)
 
 
Gain on sale before income taxes
 
 
 
10,863

 
 
Income tax provision (see (e) below)
 
 
 
 
 
(9,543
)
 
 
Net gain on sale
 
 
 
 
 
$
1,320

 
 
 
 
 
 
 
 
 
 
 
 
(i)
Management has determined the preliminary estimated fair value of our 18.5% share of the common stock of Buyer Parent. The preliminary value is based on the results of (1) projections regarding the present value of Arby’s future anticipated cash flows (the “income approach”) and (2) Arby’s indicated value based on a comparison and correlation of Arby’s and other similar companies (the “market approach”).
 
 
 
 
 
 
 
 
 
 
 
 
 
The preliminary estimated common stock value is subject to change as a result of many factors including, among others, any changes in Arby’s business plans, changing economic conditions and the competitive environment. Management believes that a change in the assumptions utilized in either the income approach or the market approach would not result in a significantly different preliminary estimated common stock value.
 
 
 
 
 
 
 
 
 
 
 
 
(ii)
Arby’s historical stockholders’ equity
 
$
160,007

 
 
 
 
 
 
 
Less: Effect of settlement of intercompany account (see (c) above)
 
(34,170
)
 
 
 
 
 
 
 
 
 
$
125,837

 
 
 
 
 

(e)
Income taxes related to the estimated pre-tax gain on sale. Income taxes are based on the statutory tax rate effective for the transaction adjusted for the impact of Arby’s non-deductible goodwill.
(f)
An increase in accrued expenses, net of income taxes, for one-time nonrecurring costs, primarily transaction bonuses and other compensation costs, directly related to the closing of the sale transaction which will be included in the statements of operations of The Wendy’s Company and Wendy’s Restaurants within the 12 months following the closing. (See “Nonrecurring and Other Costs” below for additional information.)
(g)
The reversal of charges for legal fees, net of income taxes, directly related to the closing of the sale transaction included in The Wendy’s Company and Wendy’s Restaurants historical statements of operations for the three months ended April 3, 2011, which will not have a continuing impact on operations.

(h)
The effect on income taxes related to the closing of the sale transaction. Beginning in 2009, Arby’s historical financial statements provided a valuation allowance for its net deferred tax assets; such allowance was reversed when Arby’s was consolidated by Wendy’s Restaurants. As a result of the sale transaction, the reversal of Arby’s income tax expense in 2009 and income tax benefit in 2010 and 2011 by Wendy’s Restaurants is not required.


14

THE WENDY’S COMPANY AND SUBSIDIARIES
WENDY’S RESTAURANTS, LLC AND SUBSIDIARIES
COMBINED NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(In Thousands)

Nonrecurring and Other Costs

Included in the calculation of the gain on the sale of Arby’s (see (d) above) are transaction costs which are one-time nonrecurring costs that are directly attributable to the transaction, but are not reflected in the accompanying unaudited pro forma condensed consolidated statements of operations.

Additionally, The Wendy’s Company and Wendy’s Restaurants will incur costs directly related to the closing of the transaction which will be included in the statements of operations of The Wendy’s Company and Wendy’s Restaurants within the 12 months following the closing of the transaction as follows:

•
Transaction bonuses to certain employees of $2,000
•
Employee retention bonuses of $5,100 anticipated to be paid within 60 days of closing;
•
Share-based compensation expense of $1,000 related to accelerated vesting of certain stock options and certain restricted stock and restricted stock units; and
•
Aggregate compensation costs of $700 paid to two Wendy’s Company and Wendy’s Restaurants corporate executives due to the possible relocation of certain corporate offices.

In addition, The Wendy’s Company and Wendy’s Restaurants will incur compensation expense of $1,500 for one of our corporate executives should the corporate offices relocate. Should the relocation occur, this amount is expected to be expensed in The Wendy’s Company and Wendy’s Restaurants statements of operations over the three year period following the relocation.

15