Wendy’s/Arby’s Group Reports 4th Quarter and Full-Year 2009 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 3, 2010.

Roland Smith, President and Chief Executive Officer of Wendy’s/Arby’s Group, said: “In 2009, we achieved 16% growth in annual adjusted EBITDA1, despite the challenging economic environment. We also produced a 330-basis point increase in Wendy’s® company-operated restaurant margin, significant G&A expense reductions and strong cash flow. We are making great strides re-energizing our Wendy’s brand and we believe our fourth quarter same-store sales were among the strongest in the industry. At Arby’s®, we are implementing a turnaround plan to improve customer traffic and sales. Both of our brands focused on value menus in January 2010 and same-store sales improved as compared to the fourth quarter of 2009. Also, we have completed $120 million of our $200 million stock repurchase program, and we are confident in the long-term growth prospects of our Company.”

Fourth Quarter Summary (14 weeks in 2009 vs. 13 weeks in 2008)

* Fourth quarter 2009 adjusted EBITDA, excluding pre-tax integration-related costs and non-recurring net charges of $20.7 million, was $103.3 million, and increased 38.9% as compared to 2008 fourth quarter adjusted EBITDA of $74.4 million, excluding pre-tax integration-related costs of $5.0 million.

* Consolidated revenues were $900.9 million in the fourth quarter of 2009.

* Fourth quarter 2009 net loss was $13.6 million, or $0.03 per share, including after-tax net special charges of $44.5 million, or $0.10 per share. Fourth quarter 2008 net loss was $393.2 million, or $0.84 per share, including after-tax net special charges of $417.7 million, or $0.89 per share.

Full-Year 2009 Summary (53 weeks in 2009 vs. 52 weeks in 2008)

* 2009 adjusted EBITDA, excluding pre-tax integration-related costs and non-recurring net charges of $40.8 million, was $425.2 million, and increased 15.9% as compared to pro-forma 2008 adjusted EBITDA of $366.9 million, excluding pre-tax integration-related costs of $8.3 million and special committee charges of $84.2 million.

* Consolidated revenues were $3.6 billion in 2009.

* 2009 net income was $5.1 million, or $0.01 per share, including after-tax special charges of $84.7 million, or $0.18 per share. 2008 pro forma net loss was $492.0 million, or $1.05 per share, including after-tax special charges of $565.9 million, or $1.21 per share.

Full-Year 2010 Financial Outlook

“2010 will be a year of investing in our future growth. At Wendy’s, we anticipate continued progress as we build on our ‘Real’ brand positioning and focus on remodeling our restaurants. We are also investing in our breakfast initiative at Wendy’s and expanding it to additional markets,” Smith said.

“At Arby’s, we have established a turnaround plan for the brand to rebuild customer traffic and sales. Our initiatives include expanding Arby’s value menu and investing in a significant remodeling program,” said Smith. “At the same time, we plan to invest in our international business to substantially grow in key markets outside of North America.

“Due to the incremental cost of these investments, our better than expected progress in 2009 on Wendy’s margin growth and G&A expense reduction, and weak economic conditions, we expect modest adjusted EBITDA growth in 2010,” Smith said. “Assuming the economy improves, we expect to return to mid-teens adjusted EBITDA growth in 2011.”

The Company’s 2010 outlook includes the following expectations:

* Adjusted EBITDA growth in the low to mid single-digits, excluding the effect of the 53rd week in 2009 and an incremental expense for Wendy’s breakfast program in 2010 to expand into additional markets.

* Positive same-store sales at Wendy’s.

* Negative same-store sales at Arby’s but improving on a year-over-year basis.

* Capital expenditures of approximately $165 million in 2010, up from approximately $102 million in 2009, which includes investments in 12 new company-owned Wendy’s restaurants and 100 remodels of company-owned restaurants at each brand (200 total remodels).

First Quarter 2010 Sales Trends

Wendy’s North American company-operated same-store sales trends improved in early 2010 as the Company emphasized value with 99-cents Spicy Chicken™ nuggets and re-introduced its premium fish sandwich. Wendy’s North America company-operated same-store sales increased 0.3% in January.

“We believe Wendy’s January sales were among the strongest in the restaurant industry,” said Smith.

Arby’s same-store sales trends also improved in early 2010 as the brand expanded its $1 value menu to more than 2,500 restaurants. While sales improved more significantly during the three weeks supported by television advertising, for the full month of January North America company-operated same-store sales were -7.4% as compared to -12.6% in the fourth quarter of 2009.

Exceptionally severe weather and snow in the Central and Eastern portions of the U.S. have negatively impacted February sales trends at both brands and the industry overall.

Wendy’s Fourth Quarter 2009 Brand Summary

For the fourth quarter of 2009, Wendy’s total revenue was $630.2 million compared to revenue of $605.4 million in the fourth quarter a year ago, a year-over-year increase of $24.8 million due primarily to the effect of the additional week in the quarter offset by lower company same-store sales.

* Wendy’s North America systemwide same-store sales decreased 3.0%.

* Wendy’s North America company-operated same-store sales decreased 3.1%, excluding the effect of approximately 300 fewer Wendy’s restaurants serving breakfast, compared to the fourth quarter of 2008. With the effect of breakfast removal, company-operated same-store sales decreased 4.1% compared to the fourth quarter a year ago.

* Wendy’s North America franchise same-store sales decreased 2.6%. Franchise sales were not materially impacted by changes in the number of restaurants serving breakfast.

* Wendy’s company-operated restaurant margin was 15.9% for the fourth quarter, compared to 11.7% in the fourth quarter of 2008, reflecting 420 basis points of improvement. The year-over-year improvement was due to lower commodity costs (190 basis points) and operational improvements in food, labor and controllable costs, as well as price increases.

“At Wendy’s, we drove substantial operational improvements and increased fourth quarter margin growth significantly,” said Smith. “Wendy’s 2009 fourth quarter same-store sales performance reflected tough economic trends, as well as our strong 2008 same-store sales comparison of +3.7%. We improved sales trends throughout the quarter as we focused on effective value offerings, including our $2.99 Deluxe combo meals and 99-cents Spicy Chicken nuggets.”

Wendy’s Full-Year 2009 Brand Summary

For the full-year of 2009, Wendy’s total revenue was $2.4 billion compared to $2.4 billion a year ago on a pro-forma basis.

* Wendy’s North America systemwide same-store sales decreased 0.7%.

* Wendy’s North America company-operated same-store sales decreased 0.3%, excluding the effect of fewer Wendy’s restaurants serving breakfast, compared to 2008. With the effect of breakfast removal, company-operated same-store sales decreased 1.7% compared to a year ago.

* Wendy’s North America franchise same-store sales decreased 0.3%. Franchise sales were not materially impacted by changes in the number of restaurants serving breakfast.

* Wendy’s company-operated restaurant margin was 14.9% as compared to 11.6% for pro-forma 2008, reflecting 330 basis points of improvement.

* Wendy’s ended 2009 with 6,541 restaurants, a net decrease of 89 units from the end of 2008, which includes the effect of closing 75 franchise restaurants in the Japanese market.

“For the full-year, restaurant margin improved 330 basis points, with no benefit from commodity costs, since costs were higher in the first half and lower in the second half of the year. I am proud of our management team and restaurant operators for their excellent performance during 2009. We are more than halfway to our three-year target of expanding Wendy’s margins by 500 basis points and I am confident that we can reach our goal,” Smith said.

Arby’s Fourth Quarter 2009 Brand Summary

For the fourth quarter of 2009, Arby’s total revenue was $270.8 million compared to $291.1 million in the fourth quarter a year ago, a decrease of $20.3 million, which was primarily due to declines in same-store sales partially offset by the additional week in the quarter.

* Arby’s North America systemwide same-store sales decreased 11.0%.

* Arby’s North America company-operated same-store sales declined 12.6% and North America franchise same-store sales declined 10.2%.

* Arby’s company-operated restaurant margin was 14.2% in the fourth quarter of 2009, compared to 14.6% in the fourth quarter of 2008. The year-over-year difference was due primarily to sales deleveraging offset by favorable commodity costs and a one-time benefit of $3.9 million (150 basis points).

“Arby’s fourth quarter same-store sales were lower than expected,” said Smith. “Although consumers responded positively to the quality and variety in our $5.01 combo offerings, the promotion did not drive incremental traffic. In January, we expanded our $1 value menu, which includes a Jr. Roast Beef, Curly Fries and Jr. Chicken Sandwich, among other items. We were encouraged by same-store sales improvement in our media-supported markets and plan a systemwide expansion in April with national television advertising.”

Arby’s Full-Year 2009 Brand Summary

For the full-year of 2009, Arby’s total revenue was $1.1 billion compared to $1.2 billion for 2008.

* Arby’s North America systemwide same-store sales decreased 8.8%.

* Arby’s North America company-operated same-store sales declined 8.2% and North America franchise same-store sales declined 9.0%.

* Arby’s company-operated restaurant margin was 13.9% as compared to 16.1% for 2008, reflecting a decrease of 220 basis points. The year-over-year difference was due primarily to sales deleveraging offset by favorable commodity costs and a one-time benefit of $3.9 million (40 basis points).

* Arby’s ended the year with 3,718 restaurants, a net decrease of 38 units from the end of 2008.

“As interim president of Arby’s, I will lead the brand’s turnaround efforts until we select a successor,” Smith said. “Arby’s will re-emerge as a stronger brand as we focus our entire system on strategies to improve the customer experience, grow sales and expand store profits.”

2009 Net Special Expense Charges

For the fourth quarter of 2009, the Company recorded net pre-tax special expense charges of approximately $71.7 million ($44.5 million after tax), including impairment charges, integration-related expenses, start-up expenses for the Wendy’s purchasing cooperative and pension withdrawal expense related to Wendy’s bakery, offset in part by the benefit from vacation policy standardization across the Company.

Full-year 2009 net pre-tax special charges were $138.2 million ($84.7 million after tax), including impairment charges, integration-related expenses, start-up expenses for the Wendy’s co-op, pension withdrawal expense related to the Wendy’s bakery, the favorable effect of vacation policy standardization, depreciation adjustments related to the allocation of the Wendy’s purchase price, and investment-related and other expenses.

2009 Cash Flow

For the full-year 2009, net cash from operating activities totaled $298.8 million. Capital expenditures totaled $101.9 million. Net cash provided by continuing operations, which included proceeds of $551.1 million from the issuance of Senior Notes, was approximately $505.3 million. At year-end, cash and cash equivalents were $591.7 million, which provides significant financial flexibility.

Stock Repurchase

Since the Board of Directors authorized a stock repurchase program in 2009, the Company has repurchased 26.1 million common stock shares for approximately $120.2 million as of February 26, 2010, at an average price of $4.61 per share. The Company has a total of $200 million authorized for common stock repurchases, of which $79.8 million remains available.

At the close of business on February 26, 2010, the Company had 443,829,031 shares of common stock outstanding. The current common stock repurchase program will remain in effect through January 2, 2011, and will allow the Company to make repurchases as market conditions warrant.