Edgar Filing: WENDY'S/ARBY'S GROUP, INC.

form10q_080609.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended June 28, 2009

( )	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

WENDY’S/ARBY’S GROUP, INC.

(Exact name of registrant as specified in its charter)

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


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

	(678) 514-4100
	(Registrant’s telephone number, including area code)


	(Former name, former address and former fiscal year, if changed since last report)

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

Yes [X] No [ ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes [ ] No [ ]

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

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

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

Yes [ ] No [X]

There were 470,939,552 shares of the registrant’s Common Stock outstanding as of July 31, 2009.

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

WENDY’S/ARBY’S GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In Thousands)

	June 28,			December 28,
	2009			2008
ASSETS	(Unaudited)
Current assets:
Cash and cash equivalents	$	616,001		$	90,090
Restricted cash equivalents		2,481			20,792
Accounts and notes receivable		87,719			97,258
Inventories		24,386			24,646
Prepaid expenses and other current assets		40,542			28,990
Deferred income tax benefit		57,353			37,923
Advertising fund restricted assets		84,686			81,139
Total current assets		913,168			380,838
Restricted cash equivalents		7,525			34,032
Notes receivable		34,160			34,608
Investments		102,269			133,052
Properties		1,701,159			1,770,372
Goodwill		869,860			853,775
Other intangible assets		1,402,463			1,411,473
Deferred costs and other assets		51,811			27,470
Total assets	$	5,082,415		$	4,645,620

LIABILITIES AND EQUITY

Current liabilities:
Current portion of long-term debt	$	29,266		$	30,426
Accounts payable		95,515			139,340
Accrued expenses and other current liabilities		257,504			247,334
Advertising fund restricted liabilities		84,686			81,139
Liabilities related to discontinued operations		4,196			4,250
Total current liabilities		471,167			502,489
Long-term debt		1,503,035			1,081,151
Deferred income		35,719			16,859
Deferred income taxes		497,009			475,243
Other liabilities		173,663			186,433
Commitments and contingencies
Equity:
Common stock		47,042			47,042
Additional paid-in capital		2,754,255			2,753,141
Retained deficit		(367,642	)		(357,541	)
Common stock held in treasury		(7,892	)		(15,944	)
Accumulated other comprehensive loss		(23,941	)		(43,253	)
		2,401,822			2,383,445
Total liabilities and equity	$	5,082,415		$	4,645,620

See accompanying notes to unaudited condensed consolidated financial statements.

WENDY’S/ARBY’S GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In Thousands Except Per Share Amounts)

	Three Months Ended						Six Months Ended
	June 28,			June 29,			June 28,			June 29,
	2009			2008			2009			2008
	(Unaudited)
Revenues:
Sales	$	816,195		$	291,340		$	1,589,438		$	572,919
Franchise revenues		96,492			21,674			187,233			42,949
		912,687			313,014			1,776,671			615,868
Costs and expenses:
Cost of sales		686,462			244,992			1,362,404			478,437
General and administrative		112,746			42,122			222,624			87,033
Depreciation and amortization		44,687			16,355			96,349			32,269
Impairment of long-lived assets		8,700			1,338			15,580			1,417
Facilities relocation and corporate restructuring		3,013			(41	)		7,174			894
Other operating expense (income), net		572			-			2,099			(487	)
		856,180			304,766			1,706,230			599,563
Operating profit		56,507			8,248			70,441			16,305
Interest expense		(31,065	)		(13,944	)		(53,214	)		(27,435	)
Investment expense, net		(2,793	)		(5,699	)		(4,587	)		(3,535	)
Other than temporary losses on investments		(789	)		(3,500	)		(3,916	)		(71,586	)
Other income (expense), net		1,581			1,224			(1,016	)		(3,355	)
Income (loss) before income taxes		23,441			(13,671	)		7,708			(89,606	)
(Provision for) benefit from income taxes		(8,549	)		6,766			(3,740	)		15,230
Net income (loss)	$	14,892		$	(6,905	)	$	3,968		$	(74,376	)

Basic and diluted income (loss) per share:
Common stock (A)	$	.03		$	(.07	)	$	.01		$	(.80	)
Class B common stock		N/A			(.07	)		N/A			(.80	)

Dividends declared per share:
Common stock (A)	$	.015		$	.08		$	.03		$	.16
Class B common stock		N/A			.09			N/A			.18

______________

(A)

In connection with the May 28, 2009 amendment and restatement of our Certificate of Incorporation, Class A common stock is now referred to as Common Stock.

See accompanying notes to unaudited condensed consolidated financial statements.

WENDY’S/ARBY’S GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands)

	Six Months Ended
	June 28,			June 29,
	2009			2008
	(Unaudited)
Cash flows from continuing operating activities:
Net income (loss)	$	3,968		$	(74,376	)
Adjustments to reconcile net income (loss) to net cash provided by continuing operating activities:
Depreciation and amortization		96,349			32,269
Net receipt of deferred vendor incentive		19,532			7,295
Impairment of long-lived assets		15,580			1,417
Write-off and amortization of deferred financing costs		11,824			6,320
Share-based compensation provision		7,760			2,763
Non-cash rent expense		6,919			28
Non-cash operating investment adjustments, net (see below)		2,605			75,858
Equity in earnings in joint venture		(3,643	)		-
Distributions received from joint venture		7,106			-
Deferred income tax benefit, net		(710	)		(15,315	)
Other, net		(708	)		107
Changes in operating assets and liabilities:
Accounts and notes receivable		747			(1,802	)
Inventories		324			787
Prepaid expenses and other current assets		(11,646	)		9,154
Accounts payable, accrued expenses and other current liabilities		(9,559	)		(21,538	)
Net cash provided by continuing operating activities		146,448			22,967
Cash flows from continuing investing activities:
Capital expenditures		(40,015	)		(40,443	)
Proceeds from dispositions		7,680			80
Investing investment activities, net (see below)		36,911			155
Cost of Wendy’s Merger		-			(5,443	)
Cost of acquisitions, less cash acquired		-			(9,537	)
Other, net		1,166			(168	)
Net cash provided by (used in) continuing investing activities		5,742			(55,356	)
Cash flows from continuing financing activities:
Proceeds from long-term debt		553,776			19,622
Repayments of long-term debt		(138,402	)		(29,394	)
Deferred financing costs		(29,613	)		-
Dividends		(14,073	)		(16,101	)
Net distributions to minority interests		-			(742	)
Other, net		1,384			-
Net cash provided by (used in) continuing financing activities		373,072			(26,615	)
Net cash provided by (used in) continuing operations before effect of exchange rate changes on cash		525,262			(59,004	)
Effect of exchange rate changes on cash		703			-
Net cash provided by (used in) continuing operations		525,965			(59,004	)
Net cash used in operating activities of discontinued operations		(54	)		(19	)
Net increase (decrease) in cash and cash equivalents		525,911			(59,023	)
Cash and cash equivalents at beginning of period		90,090			78,116
Cash and cash equivalents at end of period	$	616,001		$	19,093

See accompanying notes to unaudited condensed consolidated financial statements.

WENDY’S/ARBY’S GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands)

	Six Months Ended
	June 28,			June 29,
	2009			2008
	(Unaudited)
Detail of cash flows related to investments:
Operating investment adjustments, net:
Other than temporary losses on investments	$	3,916		$	71,586
Other net recognized (gains) losses		(1,311	)		4,272
	$	2,605		$	75,858
Investing investment activities, net:
Proceeds from sales of available-for-sale securities and other investments	$	29,663		$	13,782
Decrease in restricted cash held for investment		26,515			41,220
Payments to cover short positions in securities and cost of available-for-sale securities and other investments purchased		(19,267	)		(54,847	)
	$	36,911		$	155
Supplemental disclosures of cash flow information:
Cash paid during the period in continuing operations for:
Interest	$	44,459		$	26,007
Income taxes, net of refunds	$	4,427		$	2,337
Supplemental schedule of non-cash investing and financing activities:
Total capital expenditures	$	44,196		$	46,483
Cash capital expenditures		(40,015	)		(40,443	)
Non-cash capitalized lease and certain sales-leaseback transactions	$	4,181		$	6,040

Non-cash additions to long-term debt from acquisitions	$	-		$	9,574

See accompanying notes to unaudited condensed consolidated financial statements.

WENDY’S/ARBY’S GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

(1) Basis of Presentation

The accompanying unaudited condensed consolidated financial statements (the “Financial Statements”) of Wendy’s/Arby’s Group, Inc. (“Wendy’s/Arby’s” or “Wendy’s/Arby’s Group” and, together with its subsidiaries, the “Company”, “we”, “us” or “our”) have been prepared in accordance with Rule 10-01 of Regulation S-X promulgated by the Securities and Exchange Commission (the “SEC”) and, therefore, do not include all information and footnotes necessary for a fair presentation of financial position, results of operations and cash flows in conformity with accounting principles generally accepted in the United States of America (“GAAP”). In our opinion, however, the Financial Statements contain all adjustments necessary to present fairly our financial position as of June 28, 2009 and results of our operations for the three months and six months ended June 28, 2009 and June 29, 2008 and our cash flows for the six months ended June 28, 2009 and June 29, 2008. The results of operations for the three months and six months ended June 28, 2009 are not necessarily indicative of the results to be expected for the full 2009 fiscal year. The results of operations for the six months ended June 29, 2008 do not include the results of operations of Wendy’s International, Inc. (“Wendy’s”) as such periods occurred prior to the merger with Wendy’s. These Financial Statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended December 28, 2008 (the “Form 10-K”). In addition, in preparing the Financial Statements, we have reviewed and considered all significant events occurring subsequent to June 28, 2009 and up until August 6, 2009, the date of the issuance of the Financial Statements.

We report on a fiscal year consisting of 52 or 53 weeks ending on the Sunday closest to December 31. All three-month periods presented contain 13 weeks and all six-month periods presented contain 26 weeks. Because our 2009 fiscal year, ending on January 3, 2010, will contain 53 weeks, our fourth quarter will contain 14 weeks. All references to years and quarters relate to fiscal periods rather than calendar periods.

(2) Acquisitions and Dispositions

Merger with Wendy’s International, Inc.

On September 29, 2008, we completed the merger with Wendy’s (“Wendy’s Merger”) as described in the Form 10-K for the year ended December 28, 2008. Immediately prior to the Wendy’s Merger, each share of our Class B Common Stock was converted into Class A Common Stock on a one for one basis (the “Conversion”). The results of operations and cash flows of Wendy’s® have been included in the accompanying unaudited condensed consolidated statements of operations and cash flows for the three months and six months ended June 28, 2009, but have not been included in such financial statements for the three months and six months ended June 29, 2008.

The preliminary allocation of the Wendy’s merger consideration to the assets acquired and liabilities assumed, which remains subject to finalization, is as follows:

WENDY’S/ARBY’S GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

Value of shares of Wendy’s/Arby’s common stock issued in exchange for Wendy’s common shares	$	2,476,197
Value of Wendy’s stock options that have been converted into Wendy’s/Arby’s options		18,296
Estimated Wendy’s Merger costs		21,028
Total estimated merger consideration		2,515,521

Net book value of Wendy’s assets acquired and liabilities assumed		796,588
Less: Wendy’s historical goodwill acquired		(83,794	)
Net book value of Wendy’s assets acquired and liabilities assumed		712,794
Excess of merger consideration over book value of Wendy’s assets acquired and liabilities assumed		1,802,727
Change in fair values of assets and liabilities allocated to:
(Increase)/decrease in:
Current assets
Accounts and notes receivable		(694	)
Prepaid expenses and other current assets		985
Investments		(64,169	)
Properties		(47,622	)
Other intangible assets
Trademark		(900,109	)
Franchise agreements		(353,000	)
Favorable leases		(122,438	)
Computer software		9,572
Deferred costs and other assets		(377	)

Increase/(decrease) in:
Accrued expenses and other current liabilities		2,035
Long-term debt, including current portion of $228		(56,337	)
Other liabilities		(36,960	)
Unfavorable leases		70,762
Deferred income tax liability		551,943
Total adjustments		(946,409	)
Goodwill	$	856,318

Summarized below is the change in goodwill during the six months ended June 28, 2009 resulting from changes in the estimated merger consideration and in the preliminary allocation of the revised merger consideration to the estimated fair vales of assets acquired and liabilities assumed:

Goodwill as reported at December 28, 2008	$	845,631
Change in total estimated merger consideration:
Decrease in the value of Wendy’s stock options that have been converted into Wendy’s/Arby’s options		(199	)
Increase in Wendy’s Merger costs		325
Changes to fair values of assets and liabilities:
Increase in properties		(2,704	)
Increase in favorable leases		(5,170	)
Increase in computer software		6
Decrease in accrued expenses and other current liabilities		(3,506	)
Increase in other liabilities		9,614
Increase in unfavorable leases		6,709
Increase in deferred income tax liability		5,612
Goodwill as reported at June 28, 2009	$	856,318

WENDY’S/ARBY’S GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

The following unaudited supplemental pro forma condensed consolidated summary operating data (the "As Adjusted” data) of the Company for the three months and six months ended June 29, 2008 has been prepared by adjusting the historical data as set forth in the accompanying unaudited condensed consolidated statement of operations to give effect to the Wendy’s Merger and the Conversion as if they had been consummated as of December 31, 2007:

	Three months ended June 29, 2008					Six months ended June 29, 2008
	As Reported			As Adjusted		As Reported			As Adjusted
Revenues:
Sales	$	291,340		$	847,425	$	572,919		$	1,642,021
Franchise revenues		21,674			97,823		42,949			189,007
Total revenues		313,014			945,248		615,868			1,831,028
Operating profit		8,248			45,381		16,305			64,791
Net (loss) income		(6,905	)		12,419		(74,376	)		(52,664	)
Basic and diluted (loss) income per share:
Common Stock:		(.07	)		.03		(.80	)		(.11	)
Class B Common Stock:		(.07	)		N/A		(.80	)		N/A

This 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 the Wendy’s Merger and Conversion actually been consummated as of December 31, 2007 or of the Company's future results of operations.

Other acquisitions

We completed the acquisitions of the operating assets, and assumed liabilities, of 45 Arby’s® franchised restaurants during the six months ended June 29, 2008. The total then estimated consideration for the acquisitions was $15,807 consisting of (1) $8,890 of cash (before consideration of $45 of cash acquired), (2) the assumption of $6,239 of debt and (3) $678 of related estimated expenses. The aggregate purchase price of $16,294 also included $693 of losses from the settlement of unfavorable franchise rights and a $1,180 gain on the termination of subleases both included in “Other operating expense (income), net” in the accompanying unaudited condensed consolidated statement of operations.

Dispositions

During the first half of 2009, the Company received proceeds from dispositions of $7,680 consisting of $3,384 from the sale of ten Wendy’s units to a franchisee and $4,296 related to other dispositions. These sales resulted in a net gain of $304 which is included in “Depreciation and amortization”.

(3)

Debt

Senior Notes

On June 23, 2009, Wendy’s/Arby’s Restaurants, LLC (“Wendy’s/Arby’s Restaurants”), which was formerly named Wendy’s International Holdings, LLC and is a direct wholly-owned subsidiary of Wendy’s/Arby’s, issued $565,000 principal amount of Senior Notes (the “Senior Notes”). The Senior Notes will mature on July 15, 2016 and accrue interest at 10.00% per annum, payable semi-annually on January 15 and July 15, with the first payment on January 15, 2010. The Senior Notes were issued at 97.533% of the principal amount, representing a yield to maturity of 10.50% and resulting in net proceeds paid to us of $551,061. The $13,939 discount will be accreted and the related charge included in interest expense until the Senior Notes mature. The Senior Notes are fully and unconditionally guaranteed, jointly and severally, on an unsecured basis by certain direct and indirect domestic subsidiaries of Wendy’s/Arby’s Restaurants (collectively, the “Guarantors”).

Wendy’s/Arby’s Restaurants incurred approximately $20,173 in costs related to the issuance of the Senior Notes which will be amortized to interest expense over the Senior Notes’ term utilizing the effective interest method.

An Indenture dated as of June 23, 2009 (the “Indenture”) among Wendy’s/Arby’s Restaurants, the Guarantors and U.S. Bank National Association, as trustee (the “Trustee”), includes certain customary covenants that, subject to a number of important exceptions and qualifications, limit the ability of Wendy’s/Arby’s Restaurants and its restricted subsidiaries to, among other things, incur debt or issue preferred or disqualified stock, pay dividends on equity interests, redeem or repurchase equity interests or prepay or repurchase subordinated debt, make some types of investments and sell assets, incur certain liens, engage in

WENDY’S/ARBY’S GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

transactions with affiliates (except on an arms-length basis), and consolidate, merge or sell all or substantially all of their assets. The covenants generally do not restrict Wendy’s/Arby’s Group or any of its subsidiaries that are not subsidiaries of Wendy’s/Arby’s Restaurants.

Senior Secured Term Loan

On June 10, 2009, Wendy’s/Arby’s Restaurants entered into an Amendment No. 1 to the amended and restated Arby’s Credit Agreement (as so amended, the “Credit Agreement”) which, among other things (1) permitted the issuance by Wendy’s/Arby’s Restaurants of the Senior Notes described above and the incurrence of debt thereunder, and permitted Wendy’s/Arby’s Restaurants to dividend to Wendy’s/Arby’s the net cash proceeds of the Senior Notes issuance less amounts used to prepay the term loan under the Credit Agreement and pay accrued interest thereon and certain other payments, (2) modified certain total leverage financial covenants, added certain financial covenants based on senior secured leverage ratios and modified the minimum interest coverage ratio, (3) permitted the prepayment at any time prior to maturity of certain senior notes of Wendy’s and eliminated certain incremental debt baskets in the covenant prohibiting the incurrence of additional indebtedness and (4) modified the interest margins to provide that the margins will fluctuate based on Wendy’s/Arby’s Restaurants’ corporate credit rating. Wendy’s/Arby’s Restaurants incurred approximately $3,107 in costs related to such Amendment No. 1.

As amended, the term loan under the Credit Agreement and amounts borrowed under the revolving credit facility under the Credit Agreement bear interest at our option at either (i) the Eurodollar Base Rate (as defined in the Credit Agreement), as adjusted pursuant to applicable regulations (but not less than 2.75%), plus an interest rate margin of 4.00%, 4.50%, 5.00% or 6.00% per annum, depending on Wendy’s/Arby’s Restaurants’ corporate credit rating, or (ii) the Base Rate (as defined in the Credit Agreement), which is the higher of the interest rate announced by the administrative agent for the Credit Agreement as its base rate and the Federal funds rate plus 0.50% (but not less that 3.75%), in either case plus an interest rate margin of 3.00%, 3.50%, 4.00% or 5.00% per annum, depending on Wendy’s/Arby’s Restaurants’ corporate credit rating. Based on Wendy’s/Arby’s Restaurants’ corporate credit rating at the effective date of the Amendment No. 1 and as of June 28, 2009, the applicable interest rate margins available to us were 4.50% for Eurodollar Base Rate borrowings and 3.50% for Base Rate borrowings.

Concurrently with the closing of the issuance of the Senior Notes, we prepaid the term loan under the Credit Agreement in an aggregate principal amount of $132,500 and accrued interest thereon.

WENDY’S/ARBY’S GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

(4) Fair Value Measurement of Financial Assets and Liabilities

The carrying amounts and estimated fair values of the Company’s financial instruments were as follows:

	June 28, 2009
	Carrying Amount		Fair Value

Financial assets:
Cash and cash equivalents (a)	$	616,001	$	616,001
Restricted cash equivalents (a):
Current		2,481		2,481
Non-current		7,525		7,525
Short-term investments (b)		134		134
Deerfield Capital Corp. (“DFR”) notes receivable (c)		25,518		35,184
Non-current cost investments for which it is:
Practicable to estimate fair value (d)		9,809		10,710
Not practicable to estimate fair value (e)		645
Financial liabilities:
Long-term debt, including current portion:
10.00% Senior Notes (b)		551,084		550,875
Senior secured term loan, weighted average effective interest of 7.25% as of June 28, 2009 (b)		253,463		247,760
6.20% senior notes (b)		201,353		200,813
6.25% senior notes (b)		190,813		200,000
Sale-leaseback obligations (f)		124,574		117,773
Capitalized lease obligations (f)		103,811		100,404
7% Debentures (b)		79,526		72,500
6.54% secured bank term loan (f)		19,351		18,825
Notes payable, weighted average interest of 7.27% as of December 28, 2008 (f)		4,676		4,611
5% convertible notes (g)		2,100		1,989
Other		1,550		1,507
Total long-term debt, including current portion	$	1,532,301	$	1,517,057
Guarantees of:
Lease obligations for Arby’s restaurants not operated by the Company (h)		413		413
Debt obligations of AmeriGas Eagle Propane, L.P. (i)		-		690
Wendy’s franchisee loans obligations (j)		643		643

_________________________

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

(b)	The fair values are based on quoted market prices.

(c)

The fair value of the DFR Notes received in connection with the Deerfield Sale was based on the present value of the probability weighted average of expected cash flows of the notes which could reasonably approximate their collectability. The Company established an allowance for doubtful accounts for the DFR Notes of $21,227 at December 28, 2008. The notes’ carrying amount net of the allowance was $25,518 at June 28, 2009.

(d)

These consist of investments in certain non-current cost investments. The fair values of these investments, other than Jurlique International Pty Ltd., an Australian skin and beauty products company not publicly traded (“Jurlique”), were based entirely on statements of account received from investment managers or investees which are principally based on quoted market or broker/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 broker/dealer prices, the Company relies on valuations performed by the investment managers or investees in valuing those investments or third-party appraisals.

(e)	It was not practicable to estimate the fair value of this cost investment because the investment is non-marketable.

(f)	The fair values were determined by discounting the future scheduled principal payments using an interest rate assuming the

WENDY’S/ARBY’S GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

same original issuance spread over a current Treasury bond yield for securities with similar durations.

(g)	The fair values were based on broker/dealer prices since quoted ask prices close to our fiscal quarter end date were not available for the remaining convertible notes.

(h)	The fair value was assumed to reasonably approximate the carrying amount since the carrying amount represents the fair value as of the acquisition of RTM Restaurant Group less subsequent amortization.

(i)	During the third quarter of 2009, the Company sold its remaining interest in AmeriGas Eagle Propane, L.P. The Fair Value represents management’s estimate of the value of the debt payment in place prior to the sale.

(j)

Wendy’s provided loan guarantees to various lenders on behalf of franchisees entering into pooled debt facility arrangements for new store development and equipment financing. In accordance with Financial Accounting Standards Board (“FASB”) Interpretation No. 45 (“FIN 45”), “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others”, Wendy’s has accrued a liability for the fair value of these guarantees, the calculation for which was based upon a weighed average risk percentage established at the inception of each program.

The carrying amounts of current accounts and notes receivable, non-current notes receivable (excluding the DFR Notes described above), advertising fund restricted assets and liabilities, accounts payable and accrued expenses approximated fair value due to the related allowance for doubtful accounts and notes receivable and the short-term maturities of accounts and notes receivable, accounts payable and accrued expenses.

(5) Impairment of Long-lived Assets

	Three Months Ended				Six Months Ended
	June 28,		June 29,		June 28,		June 29,
	2009		2008		2009		2008
Arby’s restaurant segment:
Impairment of Company-owned restaurants:
Properties	$	5,902	$	1,106	$	11,796	$	1,154
Intangible assets		371		232		938		263
		6,273		1,338		12,734		1,417

Wendy’s restaurant segment:				-				-
Impairment of surplus properties:		251		-		670		-

Corporate - aircraft		2,176		-		2,176		-

Total impairment of long-lived assets	$	8,700	$	1,338	$	15,580	$	1,417

The Arby’s restaurant segment impairment losses reflect (1) the deterioration in operating performance of certain restaurants and (2) additional charges for restaurants impaired in a prior year which did not subsequently recover. The Wendy’s restaurant segment impairment losses reflect write-downs in the carrying value of surplus properties and properties held for sale.

The Corporate impairment loss reflects the reduction of our carrying value of one of our corporate aircraft to its net realizable value based on the sale of this aircraft in July 2009.

Impairment losses represented the excess of the carrying value over the fair value of the affected assets and are included in “Impairment of long-lived assets.” The fair values (Level 3 Inputs as described in Statement of Financial Accounting Standards (“SFAS”) No. 157, “Fair Value Measurements” (“SFAS 157”)) of impaired assets discussed above for the Arby’s restaurants segment were estimated based upon the present values of the anticipated cash flows associated with each related Company-owned asset. The fair values (Level 2 Inputs as described in SFAS 157) of the impaired assets discussed above for the Wendy’s restaurants segment were estimated based upon their expected realizable value, which reflect market declines in the areas where the properties are located.

WENDY’S/ARBY’S GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

(6) Facilities Relocation and Corporate Restructuring

The facilities relocation and corporate restructuring charges in our restaurant segment for the six months ended June 28, 2009 of $7,174 are primarily related to severance costs in connection with the Wendy’s Merger. We expect to incur additional facilities relocation and corporate restructuring charges with respect to additional severance costs in connection with the Wendy’s Merger of $1,696 in the remainder of 2009.

An analysis of activity in the facilities relocation and corporate restructuring accrual during the six months ended June 28, 2009 is as follows:

	Six Months Ended
	June 28, 2009
	Balance December 28,								Balance June 28,		Total Expected to be		Total Incurred
	2008		Provision			Payments			2009		Incurred		to Date
Wendy’s restaurant segment:
Cash obligations:
Severance costs	$	3,101	$	7,246		$	(3,562	)	$	6,785	$	12,043	$	10,347
Total Wendy’s restaurant segment		3,101		7,246			(3,562	)		6,785		12,043		10,347

Arby’s restaurant segment:
Cash obligations:
Employee relocation costs		72		(72	)		-			-		4,579		4,579
Other		-		-			-			-		7,471		7,471
		72		(72	)		-			-		12,050		12,050
Non-cash charges		-		-			-			-		719		719
Total Arby’s restaurant segment		72		(72	)		-			-		12,769		12,769

Corporate:
Cash obligations:
Severance and retention incentive compensation		962		-			(257	)		705		84,622		84,622
Non-cash charges		-		-			-			-		835		835
Total corporate		962		-			(257	)		705		85,457		85,457
	$	4,135	$	7,174		$	(3,819	)	$	7,490	$	110,269	$	108,573

(7) Investment in joint venture with Tim Hortons Inc.

Wendy’s is a partner in a Canadian restaurant real estate joint venture with Tim Hortons Inc. (“TimWen”). Wendy’s 50% share of the joint venture is accounted for using the Equity Method. Our equity in earnings from this joint venture is included in “Other operating expense (income), net”.

WENDY’S/ARBY’S GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

Presented below is a summary of components (unaudited) related to our portion of TimWen included in our Consolidated Balance Sheet and Consolidated Statement of Operations as of and for the six months ended June 28, 2009 (since the Wendy’s Merger).


Balance at December 28, 2008	$	89,771

Equity in earnings for the six months ended June 28, 2009		4,958
Amortization of purchase price adjustments		(1,315	)
		3,643		(a)

Distributions		(7,106	)
Currency translation adjustment included in “Comprehensive Income (loss)”		5,255
Balance at June 28, 2009	$	91,563		(b)

______________________________

(a)

Equity in earnings for the six months ended June 28, 2009 is included in “Other operating expense (income), net”.

(b)

Included in “Investments”.

Presented below is a summary of unaudited financial information of TimWen as of and for the six months ended June 28, 2009 in Canadian dollars. The summary balance sheet financial information does not distinguish between current and long-term assets and liabilities:

	June 28, 2009
	(Canadian)
Balance sheet information:
Properties	C$	85,232
Cash and cash equivalents		701
Accounts receivable		4,784
Other		2,310
	C$	93,027

Accounts payable and accrued liabilities	C$	1,774
Other liabilities		10,896
Partners’ equity		80,357
	C$	93,027

	Six months ended June 28, 2009
	(Canadian)
Income statement information:
Revenues	C$	18,762
Income before income taxes and net income		11,935

WENDY’S/ARBY’S GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

(8) Other Than Temporary Losses on Investments

	Three Months Ended				Six Months Ended
	June 28,		June 29,		June 28,		June 29,
	2009		2008		2009		2008

Cost method investments	$	789	$	3,500	$	3,115	$	3,500
Available-for-sale security		-		-		801		-
DFR common stock		-		-		-		68,086
	$	789	$	3,500	$	3,916	$	71,586

We analyze our unrealized losses on a quarterly basis and, due to current market conditions and other factors, we recorded other than temporary losses on investments of $789 and $3,115 in the 2009 second quarter and for the first half of 2009, respectively, attributable to the decline in fair value of two of our cost investments. Any other than temporary losses on our investments are dependent upon the underlying economics and/or volatility in their value and may or may not recur in future periods. We recorded other than temporary losses in the 2008 second quarter of $3,500 attributable to a decline in the value of our investment in Jurlique. We recorded other than temporary losses on investments in the 2009 first half of $801 related to other than temporary losses on an available-for-sale security in an account (the “Equities Account”) which was managed by a management company (the “Management Company”) formed by our Chairman, who is our former Chief Executive Officer, and our Vice Chairman, who is our former President and Chief Operating Officer, and a director, who is also our former Vice Chairman (collectively, the “Principals”).

As described in the Form 10-K, based on the decline in the market price of the shares received in connection with the sale of our interest in Deerfield to DFR , we concluded that the fair value and, therefore, the carrying value of the common shares owned by us was impaired. As a result, we recorded an other than temporary loss for the 2008 first quarter of $68,086 (without tax benefit) which included $11,074 of pre-tax unrealized holding losses recorded prior to 2008. As a result of the distribution of the DFR common stock, the income tax loss that resulted from the decline in value of our investment of $68,086 is not deductible for income tax purposes and no income tax benefit was recorded related to this loss.

(9) Income Taxes

The effective tax rate for the three months ended June 28, 2009 and the tax benefit for the three months ended June 29, 2008 on the loss before income taxes was 36.5% and 49.5%, respectively. These rates vary from the U.S. federal statutory rate of 35% due to the 2009 and 2008 three month effects of (1) state income taxes, net of federal income tax benefit, (2) non-deductible expenses, (3) adjustments to our uncertain tax positions, and (4) tax credits.

The effective tax rate for the six months ended June 28, 2009 and the tax benefit for the six months ended June 29, 2008 on the loss before income taxes was 48.5 % and 17.0 %, respectively. These rates vary from the U.S. federal statutory rate of 35% due to the 2009 and 2008 first half effects of (1) the first half 2008 effect of the other than temporary loss on our investment in the common stock of DFR, which, as a result of its subsequent distribution to shareholders, is not deductible for income tax purposes and no tax benefit was recorded related to this loss, (2) state income taxes, net of federal income tax benefit, (3) non-deductible expenses, (4) adjustments to our uncertain tax positions, and (5) tax credits.

In the first half of 2009 we increased our unrecognized tax benefits for prior periods by $1,184 and the related interest by $773. In the 2008 first half, an examination of one state income tax return was settled for fiscal years 1998 through 2000. Since this tax position was settled for less than we previously anticipated, we recorded an income tax benefit of $1,516 and a reduction of related interest expense of $1,071 in the first half of 2008. There were no other significant changes to unrecognized tax benefits in the first half of 2009 and 2008.

We include unrecognized tax benefits and the related interest and penalties for discontinued operations in “Liabilities related to discontinued operations”. There were no changes in those amounts during the first half of 2009 or 2008.

The Internal Revenue Service (the “IRS”) is currently conducting an examination of our U.S. Federal income tax return for the 2009 tax year and for the tax period ended December 28, 2008 as part of the Compliance Assurance Program (“CAP”). Our December 28, 2008 U.S. Federal income tax return includes Wendy’s for all of 2008 and Wendy’s/Arby’s for the period September 30, 2008 to December 28, 2008. Prior to the Wendy’s Merger, Wendy’s was a participant in the CAP since the beginning of the 2006 tax year. CAP is a voluntary, real-time audit arrangement whereby taxpayers and the IRS address issues

WENDY’S/ARBY’S GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

throughout the year as they emerge. Any matters relating to Wendy’s U.S. Federal income tax returns for 2007 and prior years have been settled.

Wendy’s/Arby’s U.S. Federal income tax returns for periods ended January 1, 2006 (fiscal 2005) to September 29, 2008 are not currently under examination by the IRS. Our foreign income tax returns and Wendy’s foreign income tax returns for periods prior to the Wendy’s Merger are open to examination primarily for periods ending on or after January 2, 2005. Certain of these foreign income tax returns are currently under examination. Some of our state income tax returns and some of the Wendy’s state income tax returns for periods prior to the Wendy’s Merger are currently under examination. Certain of these states have issued notices of proposed tax assessments aggregating $8,863. We dispute these notices and believe their ultimate resolution will not have a material adverse impact on our consolidated financial position or results of operations.

(10) Income (Loss) Per Share

Basic income (loss) per share is computed by dividing net income (loss) by the weighted average number of common shares outstanding. As described in the Form 10-K, in connection with the Wendy’s Merger, Wendy’s/Arby’s stockholders approved the Conversion whereby each of the then outstanding shares of Triarc class B common stock (“Class B Common Stock”) were converted into one share of Wendy’s/Arby’s Class A common stock and accordingly we now only have one class of common stock. In connection with the May 28, 2009 amendment and restatement of our Certificate of Incorporation, our Class A common stock is now referred to as Common Stock. Net loss for the three-month and six-month periods ended June 29, 2008 of $6,905 and $74,376, respectively, was allocated equally among each share of Common Stock and Class B Common Stock resulting in the same loss per share for each class.

Diluted income per share for the three-month and six-month periods ended June 28, 2009 has been computed by dividing the allocated income for the Common Stock by the weighted average number of shares plus the potential common share effect of dilutive stock options and nonvested restricted Common Shares which vest over three years (the “Nonvested Shares”), both computed using the treasury stock method. Diluted income per share for the three-month and six-month periods ended June 29, 2008 were the same as basic loss per share for each share of the Common Stock and Class B Common Stock since we reported a loss and, therefore, the effect of all potentially dilutive securities on the loss per share would have been antidilutive. The shares used to calculate diluted income per share exclude any effect of our 5% convertible notes due 2023 (the “Convertible Notes”) which would have been antidilutive since the after-tax interest on the Convertible Notes per share of Common Stock obtainable on conversion exceeded the reported basic income per share.

Our securities as of June 28, 2009 that could dilute basic income per share for periods subsequent to June 28, 2009 are (1) outstanding stock options which can be exercised into 25,409 shares of our Common Stock, (2) 400 restricted shares of Common Stock which principally vest over three years and (3) $2,100 of Convertible Notes which are convertible into 160 shares of Common Stock.

Income (loss) per share has been computed by allocating the income or loss as follows:

	Three Months Ended					Six Months Ended
	June 28,		June 29,			June 28,		June 29,
	2009		2008			2009		2008
Common Stock	$	14,892	$	(2,155	)	$	3,968	$	(23,212	)
Class B Common Stock		N/A	$	(4,750	)		N/A	$	(51,164	)

WENDY’S/ARBY’S GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

The number of shares used to calculate basic and diluted income (loss) per share are as follows:

	Three Months Ended				Six Months Ended
	June 28,		June 29,		June 28,		June 29,
	2009		2008		2009		2008
Common Stock:
Basic shares - weighted average shares outstanding		469,614		28,903		469,425		28,902
Dilutive effect of stock options and restricted shares		1,539		-		2,074		-
Diluted shares		471,153		28,903		471,499		28,902

Class B Common Stock:
Basic shares - weighted average shares outstanding		N/A		63,721		N/A		63,707
Dilutive effect of stock options and restricted shares		N/A		-		N/A		-
Diluted shares		N/A		63,721		N/A		63,707

(11) Equity

The following is a summary of the changes in equity:

	Six Months Ended
	June 28,			June 28,
	2009			2008
Balance, beginning of year	$	2,383,291		$	448,874
Effect of change in accounting for minority interests		154			229
Beginning balance, as adjusted		2,383,445			449,103
Comprehensive income (loss) (1)		23,280			(71,237	)
DFR stock dividend distribution		-			(14,464	)
Dividends paid		(14,073	)		(16,101	)
Share-based compensation expense		7,760			2,763
Other		1,410			(161	)
Balance, end of period	$	2,401,822		$	349,903

(1) The following is a summary of the components of comprehensive income (loss), net of income taxes:

	Six Months Ended
	June 28,			June 29,
	2009			2008
Net income (loss)	$	3,968		$	(74,376	)
Net change in currency translation adjustment		19,438			(106	)
Net unrealized (losses) gains on available-for-sale securities (a)		(126	)		3,676
Net unrealized gains (losses) on cash flow hedges (b)		-			(431	)
Other comprehensive income		19,312			3,139
Comprehensive income (loss)	$	23,280		$	(71,237	)

(a) Net unrealized losses on available-for-sale securities:
	Six Months Ended
	June 28,			June 29,
	2009			2008
Unrealized holding losses arising during the period	$	(28	)	$	(5,112	)
Reclassifications of prior period unrealized holding (gains) losses into net income or loss		(168	)		11,074
Change in unrealized holding gains and losses arising during the period from investments under the equity method of accounting		-			(201	)
		(196	)		5,761
Income tax benefit (provision)		70			(2,085	)
	$	(126	)	$	3,676

(b) Net unrealized gains (losses) on cash flow hedges:
	Six Months Ended
	June 29,
	2008
Unrealized holding losses arising during the period	$	(1,517	)
Reclassifications of prior period unrealized holding losses into net income or loss		809
Change in unrealized holding gains and losses arising during the period from investments under the equity method of accounting		3
		(705	)
Income tax benefit		274
	$	(431	)

(12) Business Segments

We manage and internally report our operations in two brand segments: (1) the operation and franchising of Wendy’s restaurants, including its wholesale bakery operations, and (2) the operation and franchising of Arby’s restaurants. We evaluate segment performance and allocate resources based on each segment’s operating profit (loss) and other financial and non-financial factors.

In the first quarter of 2009, Wendy’s/Arby’s began charging the restaurant segments for support services based upon budgeted segment revenues. Prior to that date, the restaurant segments had directly incurred such costs. Commencing with the second quarter of 2009, Wendy’s/Arby’s established a shared service center in Atlanta and allocated its operating costs to the restaurant segments based also on budgeted segment revenues.

The following is a summary of our segment information:

	Three months ended June 28, 2009
	Wendy’s		Arby’s
	Restaurants		Restaurants		Corporate			Total
Revenues:
Sales	$	539,123	$	277,072	$	-		$	816,195
Franchise revenues		76,055		20,437					96,492
	$	615,178	$	297,509	$	-		$	912,687
Depreciation and amortization	$	28,608	$	13,621	$	2,458		$	44,687
Operating profit (loss)	$	65,499	$	6,959	$	(15,951	)		56,507
Interest expense									(31,065	)
Investment expense, net									(2,793	)
Other than temporary losses on investments									(789	)
Other income, net									1,581
Income before income tax provision									23,441
Provision for income taxes									(8,549	)
Net income								$	14,892

WENDY’S/ARBY’S GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

	Three months ended June 29, 2008
	Arby’s
	Restaurants		Corporate			Total
Revenues:
Sales	$	291,340	$	-		$	291,340
Franchise revenues		21,674		-			21,674
	$	313,014	$	-		$	313,014
Depreciation and amortization	$	15,265	$	1,090		$	16,355
Operating profit (loss)	$	17,264	$	(9,016	)	$	8,248
Interest expense							(13,944	)
Investment expense, net							(5,699	)
Other than temporary losses on investments							(3,500	)
Other income, net							1,224
Loss before income tax benefit							(13,671	)
Benefit from income taxes							6,766
Net loss						$	(6,905	)

	Six months ended June 28, 2009
	Wendy’s		Arby’s
	Restaurants		Restaurants		Corporate			Total
Revenues:
Sales	$	1,046,126	$	543,312	$	-		$	1,589,438
Franchise revenues		147,293		39,940					187,233
	$	1,193,419	$	583,252	$	-		$	1,776,671
Depreciation and amortization	$	65,295	$	28,138	$	2,916		$	96,349
Operating profit (loss)	$	85,524	$	4,912	$	(19,995	)	$	70,441
Interest expense									(53,214	)
Investment expense, net									(4,587	)
Other than temporary losses on investments									(3,916	)
Other expense, net									(1,016	)
Income before income tax provision									7,708
Provision for income taxes									(3,740	)
Net income								$	3,968

	Six months ended June 29, 2008
	Arby’s
	Restaurants		Corporate			Total
Revenues:
Sales	$	572,919	$	-		$	572,919
Franchise revenues		42,949		-			42,949
	$	615,868		-		$	615,868
Depreciation and amortization	$	30,103	$	2,166		$	32,269
Operating profit (loss)	$	34,613	$	(18,308	)	$	16,305
Interest expense							(27,435	)
Investment expense, net							(3,535	)
Other than temporary losses on investments							(71,586	)
Other expense, net							(3,355	)
Loss before income tax benefit							(89,606	)
Benefit from income taxes							15,230
Net loss						$	(74,376	)

	Wendy’s Restaurants		Arby’s Restaurants		Corporate (a)		Total
Three months ended June 28, 2009
Cash capital expenditures	$	7,842	$	8,036	$	6,934	$	22,812

Three months ended June 29, 2008
Cash capital expenditures			$	23,673	$	-	$	23,673

Six months ended June 28, 2009
Cash capital expenditures	$	16,585	$	15,861	$	7,569	$	40,015

Six months ended June 28, 2008
Cash capital expenditures			$	40,443	$	-	$	40,443

(a) The corporate capital expenditures are primarily related to our shared services project.

(13) Transactions with Related Parties

Wendy’s/Arby’s entered into the following agreements with related parties during the second quarter of 2009:

Services Agreement

Wendy’s/Arby’s and the Management Company entered into a services agreement (the “Services Agreement”) which commenced on July 1, 2009 and will continue until June 30, 2011, unless sooner terminated. Under the Services Agreement, the Management Company will assist us with strategic merger and acquisition consultation, corporate finance and investment banking services and related legal matters. Pursuant to the terms of this agreement, we will pay the Management Company a service fee of $250 per quarter, payable in advance commencing July 1, 2009. In addition, in the event the Management Company provides substantial assistance to us in connection with a merger or acquisition, corporate finance and/or similar transaction that is consummated at any time during the period commencing on the date the Services Agreement was executed and ending six months following the expiration of its term, we will negotiate a success fee to be paid to the Management Company which is reasonable and customary for such transactions. Approximately $5,368 in fees for corporate finance advisory services were paid to the Management Company in connection with the issuance of the Senior Notes.

Under a prior services agreement, which expired on June 30, 2009, the Management Company provided a broader range of professional and strategic services to us in connection with the transition of all executive management responsibilities for the Company to the executive management team in Atlanta, Georgia.

WENDY’S/ARBY’S GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

Withdrawal Agreement

TCMG-MA, LLC (a wholly-owned subsidiary of ours and the entity which owned the Equities Account investments) (“TCMG-MA”) and the Management Company entered into a withdrawal agreement (the “Withdrawal Agreement”) which provided that TCMG-MA would be permitted to withdraw on an accelerated basis (the “Early Withdrawal”) all amounts in the Equities Account effective no later than June 26, 2009. Prior to the Withdrawal Agreement and as a result of an investment management agreement with the Management Company which was terminated on June 26, 2009, TCMG-MA had not been permitted to withdraw any amounts from the Equities Account until December 31, 2010, although $47,000 was released from the Equities Account in 2008 subject to an obligation to return that amount to the Equities Account by a specified date. In consideration for obtaining such Early Withdrawal right, TCMG-MA agreed to pay the Management Company $5,500, is not required to return the $47,000 referred to above and is no longer obligated to pay investment management and incentive fees to the Management Company. The Equities Account investments were liquidated in June 2009 for $37,401, of which $31,901 was received by us, net of the $5,500 withdrawal fee included in “Investment expense, net,” and for which we realized a gain of $2,280 in the 2009 second quarter.

Liquidation Services Agreement

Wendy’s/Arby’s and the Management Company also entered into a liquidation services agreement (the “Liquidation Services Agreement”) which provides for the Management Company to assist us in the sale, liquidation or other disposition of our cost investments and DFR Notes (the “Legacy Assets”) which are not related to the Equities Account. The term of the Liquidation Services Agreement commenced on June 10, 2009 and will end on the earlier of (1) such date as all of the Legacy Assets have been sold, liquidated or otherwise disposed of and (2) the date (which shall not be earlier than June 30, 2011) on which we notify the Management Company that we are terminating the Liquidation Services Agreement. Pursuant to the terms of this agreement, we will pay the Management Company a fee of $900 for these services which will be payable in installments as follows: (1) $450 on the date of the Liquidation Services Agreement and (2) $450 on the earlier of (a) June 30, 2010 and (b) the expiration of the term of the Liquidation Services Agreement. In addition, in the event that any or all of the Legacy Assets are sold, liquidated or otherwise disposed of for aggregate net proceeds to us in excess of the aggregate value of the Legacy Assets as of the date of the Liquidation Services Agreement of $36,607 (the “Target Amount”), then we will pay the Management Company a success fee equal to 10% of the aggregate net proceeds in excess of the Target Amount.

Aircraft Agreements

During the second quarter of 2009, the time share agreements with the Principals and the Management Company for the use of two of our aircraft expired. One of the aircraft was sold in the third quarter of 2009 to an unrelated third party (see Note 5 for a related impairment charge).

Wendy’s/Arby’s and TASCO, LLC (an affiliate of the Management Company) (“TASCO”) entered into an aircraft lease agreement (the “Aircraft Lease Agreement”) for the other aircraft that was previously under a time share agreement. The Aircraft Lease Agreement provides that the Company will lease such corporate aircraft to TASCO from July 1, 2009 until June 30, 2010. The Aircraft Lease Agreement provides that TASCO will pay $10 per month for such aircraft plus substantially all operating costs of the aircraft including all costs of fuel, inspection, servicing and storage, as well as operational and flight crew costs relating to the operation of the aircraft, and all transit maintenance costs and other maintenance costs required as a result of TASCO’s usage of the aircraft. We will continue to be responsible for calendar-based maintenance and any extraordinary and unscheduled repairs and/or maintenance for the aircraft, as well as insurance and other costs. The Aircraft Lease Agreement may be terminated by us without penalty in the event we sell the aircraft to a third party, subject to a right of first refusal in favor of the Management Company with respect to such a sale.

All of these agreements were negotiated and approved by the Audit Committee of our Board of Directors, which was advised in the process by independent outside counsel.

(14) Legal and Environmental Matters

In the Form 10-K for the fiscal year ended December 28, 2008, the Company disclosed an environmental matter with Adams Packing Association, Inc., an inactive subsidiary of the Company, whereby Adams was listed by the United States Environmental Protection Agency on the Comprehensive Environmental Response, Compensation and Liability Information System list of known or suspected contaminated sites. As discussed in our Form 10-K, based on amounts spent prior to 2008 of approximately $1,667 and after taking into consideration various legal defenses available to us, including Adams, we expect that the final resolution of this matter will not have a material effect on our financial position or results of operations.

WENDY’S/ARBY’S GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

The Company also disclosed putative class action complaints in the Form 10-K for the fiscal year ended December 28, 2008 that had been filed against Wendy’s, its directors, and in two cases also the Company, between April 25 and June 13, 2008, alleging breach of fiduciary duties arising out of the Wendy’s board of directors’ search for a merger partner and out of its approval of the merger agreement with the Company on April 23, 2008, and failure to disclose material information related to the merger in Amendment No. 3 to the Form S-4 under the Securities Act of 1933. These cases were described in the Form 10-K as the Guiseppone, Henzel, Smith and Ravanis cases. An update on the status of these cases was also included in the Company’s Form 10-Q for the quarter ended March 29, 2009.

On July 1, 2009, the Common Pleas Court of Franklin County, Ohio entered a final order approving settlement of all claims in the Guiseppone, Henzel and Smith cases and certifying a class for settlement purposes only. On July 9, 2009, the Supreme Court of the State of New York, New York County, entered a dismissal of the Ravanis case, with prejudice. The disposition of these cases was not material to the results of operations or financial condition of the Company.

In addition to the matters described above, we are involved in other litigation and claims incidental to our current and prior businesses. We have reserves for all of our legal and environmental matters aggregating $2,399 as of June 28, 2009. 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 given the aforementioned reserves and our insurance coverage, 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.

(15) Accounting Standards

Accounting Standards Adopted during 2009

In December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business Combinations” (“SFAS 141(R)”), and SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements – an amendment of ARB No. 51” (“SFAS 160”). These statements change the way companies account for business combinations and noncontrolling interests by, among other things, requiring (1) more assets and liabilities to be measured at fair value as of the acquisition date, including a valuation of the entire company being acquired where less than 100% of the company is acquired, (2) an acquirer in preacquisition periods to expense all acquisition-related costs, (3) changes in acquisition related deferred tax balances after the completion of the purchase price allocation be recognized in the statement of operations as opposed to through goodwill and (4) noncontrolling interests in subsidiaries initially to be measured at fair value and classified as a separate component of stockholders’ equity.

In addition, in April 2008, the FASB issued FASB Staff Position No. FAS 142-3, “Determination of the Useful Life of Intangible Assets” (“FSP FAS 142-3”). In determining the useful life of acquired intangible assets, FSP FAS 142-3 removes the requirement to consider whether an intangible asset can be renewed without substantial cost or material modifications to the existing terms and conditions and, instead, requires an entity to consider its own historical experience in renewing similar arrangements. FSP FAS 142-3 also requires expanded disclosure related to the determination of intangible asset useful lives.

In April 2009, the FASB issued FASB Staff Position No. FAS 141(R)-1, “Accounting for Assets Acquired and Liabilities Assumed in a Business Combination That Arise from Contingencies” (“FSP FAS 141(R)-1”). FSP FAS 141(R)-1 requires acquirers to recognize an asset acquired or liability assumed in a business combination that arises from a contingency at fair value if the acquisition-date fair value of that asset or liability can be determined during the measurement period.

SFAS 141(R), which became effective in our fiscal 2009 first quarter, will not impact our recording of the Wendy’s Merger except for any potential adjustments to deferred taxes included in the allocation of the purchase price after such allocation has been finalized. The presentation and disclosure requirements of SFAS 160 have been applied retrospectively for all periods presented. The adoption of SFAS 160 resulted in a reclassification of our minority interests from a liability to “Additional paid in capital” in our condensed consolidated balance sheets and the income statement effect for our minority interests has been included in “Other expense, net”, as such amounts are insignificant. SFAS 141 (R), FSP FAS 142-3, FSP FAS 141(R)-1 and SFAS 160 will impact future acquisitions, if any, the effect of which will depend upon the nature and terms of such agreements. The application of FSP FAS 142-3 did not have a material effect on our unaudited condensed consolidated financial statements.

In March 2008, the FASB issued SFAS No. 161, "Disclosures about Derivative Instruments and Hedging Activities" ("SFAS 161"). SFAS 161 requires companies with derivative instruments to disclose information that should enable financial-statement users to understand how and why a company uses derivative instruments, how derivative instruments and related hedged items are accounted for under SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities" (“SFAS

WENDY’S/ARBY’S GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Per Share Amounts)

133”) and how these items affect a company's financial position, results of operations and cash flows. SFAS 161 affects only these disclosures and does not change the accounting for derivatives. SFAS 161 has been applied prospectively beginning with the first quarter of our 2009 fiscal year. The application of SFAS 161 did not have any effect on disclosures in our unaudited condensed consolidated financial statements.

In April 2009, the FASB issued FASB Staff Position No. FAS 107-1, “Interim Disclosures about Fair Value of Financial Instruments” (“FSP FAS 107-1”). FSP FAS 107-1 requires expanded fair value disclosures for all financial instruments within the scope of FASB Statement No. 107, “Disclosures about Fair Value of Financial Instruments.” These disclosures are required for interim periods for publicly traded entities. In addition, entities are required to disclose the methods and significant assumptions used to estimate the fair value of financial instruments in financial statements on an interim basis. We have applied this Staff Position effective with our 2009 second quarter.

In May 2009, the FASB issued SFAS No. 165, “Subsequent Events” (“SFAS 165”). SFAS 165 defines the period after the balance sheet date during which a reporting entity’s management should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements, the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements, and the disclosures an entity should make about events or transactions that occurred after the balance sheet date. SFAS 165 is effective for interim and annual periods ending after June 15, 2009, and we have applied SFAS 165 effective with our 2009 second quarter.

Accounting Standards Not Yet Adopted

In June 2009, the FASB issued SFAS No. 167, “Consolidation of Variable Interest Entities” (“SFAS 167”). SFAS 167 alters how a company determines when an entity that is insufficiently capitalized or not controlled through voting should be consolidated. A company has to determine whether it should provide consolidated reporting of an entity based upon the entity's purpose and design and the parent company's ability to direct the entity's actions. SFAS 167 is effective commencing with our 2010 fiscal year. We are currently evaluating the effects, if any, that adoption of this standard will have on our consolidated financial statements.

Also in June 2009, the FASB issued SFAS No. 168, “The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles” (“SFAS 168”). SFAS 168 authorized the Codification as the sole source for authoritative U.S. GAAP and any accounting literature that is not in the Codification will be considered nonauthoritative. SFAS 168 will be effective commencing with our 2009 third quarter and is not anticipated to have a material effect on our consolidated financial statements.

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

This “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of Wendy’s/Arby’s Group, Inc (“Wendy’s/Arby’s” or “Wendy’s/Arby’s Group” and, together with its subsidiaries, the “Company” or “we”) should be read in conjunction with our accompanying unaudited condensed consolidated financial statements included elsewhere herein and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended December 28, 2008 (the “Form 10-K”). There have been no significant changes as of June 28, 2009 to the application of our critical accounting policies, contractual obligations (except as described below) or guarantees and commitments as described in Item 7 of our Form 10-K. Certain statements we make under this Item 2 constitute “forward-looking statements” under the Private Securities Litigation Reform Act of 1995. See “Special Note Regarding Forward-Looking Statements and Projections” in “Part II – Other Information” preceding “Item 1.” You should consider our forward-looking statements in light of our unaudited condensed consolidated financial statements, related notes, and other financial information appearing elsewhere in this report, our Form 10-K and our other filings with the Securities and Exchange Commission.

Introduction and Executive Overview

Senior Notes

On June 23, 2009, Wendy’s/Arby’s Restaurants, LLC (“Wendy’s/Arby’s Restaurants”), which was formerly named Wendy’s International Holdings, LLC and is a direct wholly-owned subsidiary of Wendy’s/Arby’s, issued $565.0 million principal amount of Senior Notes (the “Senior Notes”). The Senior Notes will mature on July 15, 2016 and accrue interest at 10.00% per annum, payable semi-annually on January 15 and July 15, with the first payment on January 15, 2010. The Senior Notes were issued at 97.533% of the principal amount, representing a yield to maturity of 10.50% and resulting in net proceeds paid to us of $551.1 million. The $13.9 million discount will be accreted and the related charge included in interest expense until the Senior Notes mature. The Senior Notes are fully and unconditionally guaranteed, jointly and severally, on an unsecured basis by certain direct and indirect domestic subsidiaries of Wendy’s/Arby’s Restaurants (collectively, the “Guarantors”).

Merger with Wendy’s International, Inc.

On September 29, 2008, we completed the merger (the “Wendy’s Merger”) with Wendy’s International, Inc. (“Wendy’s”) in an all-stock transaction in which Wendy’s shareholders received 4.25 shares of Wendy’s/Arby’s Class A Common Stock for each share of Wendy’s common stock owned. Our consolidated results of operations commencing September 29, 2008 include Wendy’s results of operations.

Our Business

Wendy’s/Arby’s is the parent company of Wendy’s and Arby’s Restaurant Group, Inc. (“ARG”), which are the owners and franchisors of the Wendy’s® and Arby’s® restaurant systems, respectively. We currently manage and internally report our operations as two business segments: the operation and franchising of Wendy’s restaurants, including its wholesale bakery operations, and the operation and franchising of Arby’s restaurants. As of June 28, 2009, the Wendy’s restaurant system was comprised of 6,608 restaurants, of which 1,395 were owned and operated by the Company. As of June 28, 2009, the Arby’s restaurant system was comprised of 3,745 restaurants, of which 1,170 were owned and operated by the Company. All 2,565 Wendy’s and Arby’s Company-owned restaurants are located principally in the United States and to a lesser extent in Canada (the “North America Restaurants”).

Restaurant business revenues for the 2009 first half include: (1) $1,534.2 million of revenues from Company-owned restaurants, (2) $55.2 million from the sale of bakery items and kid’s meal promotion items to our franchisees, (3) $173.0 million from royalty income from franchisees and (4) $14.3 million of other franchise related revenue. Our revenues increased significantly in the 2009 first half due to the Wendy’s Merger. The Wendy’s royalty rate was 4.0% for the six months ended June 28, 2009. While over 80% of our existing Arby’s royalty agreements and substantially all of our new domestic royalty agreements provide for royalties of 4.0% of franchise revenues, our average Arby’s royalty rate was 3.6% for the six months ended June 28, 2009.

Our restaurant businesses have recently experienced trends in the following areas:

Revenues

Continued lack of general consumer confidence in the economy and the effect of decreases in many consumers’ discretionary income caused by factors such as volatility in the financial markets and recessionary economic conditions, including high unemployment levels, a declining real estate market, continuing unpredictability of fuel costs, and food cost inflation;

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

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

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

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

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

Cost of Sales

Higher commodity prices which increased our food costs during 2008, with moderation in recent months;

Changes in fuel prices which, when at much higher than current levels contributed to increases in utility, distribution, and freight costs;

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

Legal or regulatory activity related to nutritional content or menu labeling which results in increased operating costs.

Other

Dislocation and weakness in the overall credit markets and higher borrowing costs in the lending markets typically used to finance new unit development and remodels. These tightened credit conditions and economic pressures are negatively impacting the renewal of franchisee licenses as well as the ability of franchisees to meet their commitments under development, rental and franchise license agreements;

A significant portion of both our Wendy’s and Arby’s restaurants are franchised and, as a result, we receive revenue in the form of royalties (which are generally based on a percentage of sales at franchised restaurants), rent and other fees from franchisees. Arby’s franchisee related accounts receivable and estimated reserves for uncollectibility have increased, and may continue to increase, as a result of the deteriorating financial condition of some of our franchisees; and

Continued competition for development sites among QSR competitors and other businesses.

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

Business Highlights

We believe there are significant opportunities to grow our business, strengthen our competitive position and enhance our profitability through the execution of the following strategies:

Revitalizing the Wendy’s and Arby’s brands by creating innovative new menu items at Wendy’s, increasing Arby’s customer traffic by targeting our “medium Arby’s customers” and expanding our breakfast daypart at both brands;

Improving Wendy’s Company-owned restaurant profitability;

Realizing cost savings related to the Wendy’s/Arby’s integration;

Strategically growing our franchise base by leveraging our brands to expand in North America as well as into new international markets with dual branded Wendy’s and Arby’s franchised restaurants; and

Acquisitions of other restaurant companies.

Key Business Measures

We track our results of operations and manage our business using the following key business measures:

Same-Store Sales

We report Arby’s North America Restaurants same-store sales commencing after a store has been open for fifteen continuous months. Wendy’s North America Restaurants same-store sales are reported after a store has been open for at least fifteen continuous months as of the beginning of the fiscal year. These methodologies are consistent with the metrics used by our management for internal reporting and analysis. Same-store sales exclude the impact of currency translation.

Restaurant Margin

We define restaurant margin as sales from Company-owned restaurants (excluding sales of bakery items and kid’s meal promotion items to franchisees) less cost of sales (excluding costs of bakery items and kid’s meal promotion items), divided by sales from Company-owned restaurants. Restaurant margin is influenced by factors such as restaurant openings and closures, price increases, the effectiveness of our advertising and marketing initiatives, featured products, product mix, the level of our fixed and semi-variable costs, and fluctuations in food and labor costs.

Deerfield

On December 21, 2007, we completed the sale (the “Deerfield sale”) of our majority capital interest in Deerfield & Company LLC (“Deerfield”), our former subsidiary, to Deerfield Capital Corp. (“DFR”) resulting in non-cash proceeds aggregating $134.6 million, consisting of 9.6 million shares of convertible preferred stock of DFR (“the DFR Preferred Stock”) with a then estimated fair value of $88.4 million and $48.0 million principal amount of series A senior secured notes of DFR due in December 2012 (the “DFR Notes”) with a then estimated fair value of $46.2 million. As discussed in the Form 10-K, we recorded a valuation allowance of $21.2 million during the fourth quarter of 2008 for these DFR Notes. We also owned an additional 0.2 million common shares in DFR.

The DFR Notes bear interest at the three-month LIBOR (0.60% at June 28, 2009) plus a factor, initially 5% through December 31, 2009, increasing 0.5% each quarter from January 1, 2010 through June 30, 2011 and 0.25% each quarter from July 1, 2011 through their maturity. The DFR Notes are secured by certain equity interests of DFR and certain of its subsidiaries. See the “Other - Legacy Assets” section below related to the potential disposition of the DFR Notes.

On March 11, 2008, DFR stockholders approved the one-for-one conversion of all its outstanding convertible preferred stock into DFR common stock which converted the 9.6 million preferred shares we held into a like number of shares of common stock. During the first quarter of 2008, our Board of Directors approved the distribution of our 9.8 million shares of DFR common stock, which also included the 0.2 million common shares of DFR discussed above, to our stockholders. The dividend, which was valued at $14.5 million, was paid on April 4, 2008 to holders of record of our Class A common stock (the “Class A Common Stock”) and our then outstanding Class B common stock (the “Class B Common Stock”).

In the first quarter of 2008, in response to unanticipated credit and liquidity events in the first quarter of 2008, DFR announced changes to its business model and significant losses. Based on these events and their negative effect on the market price of DFR common stock, we concluded that the fair value and, therefore, the carrying value of our investment in

the 9.8 million common shares was impaired. As a result, we recorded an other than temporary loss which is included in “Other than temporary losses on investments,” of $68.1 million (without tax benefit as described below). As a result of the distribution of the DFR common stock, the income tax loss that resulted from the decline in value of our investment of $68.1 million is not deductible for income tax purposes and no income tax benefit was recorded related to this loss.

Related Party Transactions

Services Agreement

Wendy’s/Arby’s and a management company (the “Management Company”) formed by our Chairman, who is our former Chief Executive Officer, and our Vice Chairman, who is our former President and Chief Operating Officer, (collectively, the “Former Executives”) and a director, who is also our former Vice Chairman (together with the Former Executives, the “Principals”), entered into a services agreement (the “Services Agreement”) which commenced on July 1, 2009 and will continue until June 30, 2011, unless sooner terminated. Under the Services Agreement, the Management Company will assist us with strategic merger and acquisition consultation, corporate finance and investment banking services and related legal matters. Pursuant to the terms of this agreement, we will pay the Management Company a service fee of $0.25 million per quarter, payable in advance commencing July 1, 2009. In addition, in the event the Management Company provides substantial assistance to us in connection with a merger or acquisition, corporate finance and/or similar transaction that is consummated at any time during the period commencing on the date the Services Agreement was executed and ending six months following the expiration of its term, we will negotiate a success fee to be paid to the Management Company which is reasonable and customary for such transactions. Approximately $5.4 million in fees for corporate finance advisory services were paid to the Management Company in connection with the issuance of the Senior Notes.

Equities Account

Prior to 2006, we invested $75.0 million in the Equities Account, which was managed by the Management Company.. The Equities Account was invested principally in equity securities, cash equivalents and equity derivatives of a limited number of publicly-traded companies. In addition, the Equities Account sold securities short and invested in market put options in order to lessen the impact of significant market downturns.

TCMG-MA, LLC (a wholly-owned subsidiary of ours and the entity which owned the Equities Account investments) (“TCMG-MA”) and the Management Company entered into a withdrawal agreement (the “Withdrawal Agreement”) which provided that TCMG-MA would be permitted to withdraw on an accelerated basis (the “Early Withdrawal”) all amounts in the Equities Account effective no later than June 26, 2009. Prior to the Withdrawal Agreement and as a result of an investment management agreement with the Management Company which was terminated on June 26, 2009, TCMG-MA had not been permitted to withdraw any amounts from the Equities Account until December 31, 2010, although $47.0 million was released from the Equities Account in 2008 subject to an obligation to return that amount to the Equities Account by a specified date. In consideration for obtaining such Early Withdrawal right, TCMG-MA agreed to pay the Management Company $5.5 million, is not required to return the $47.0 million referred to above and is no longer obligated to pay investment management and incentive fees to the Management Company. The Equities Account investments were liquidated in June 2009 for $37.4 million (the “Equities Sale”), of which $31.9 million was received by us, net of the $5.5 million withdrawal fee (the “Withdrawal Fee”) included in “Investment expense, net,” and for which we realized a gain of $2.3 million in the 2009 second quarter.

Liquidation Services Agreement

On June 10, 2009, Wendy’s/Arby’s and the Management Company entered into a liquidation services agreement (the “Liquidation Services Agreement”) whereby, the Management Company will assist us in the sale, liquidation or other disposition of our cost investments and DFR Notes (the “Legacy Assets”), which are not related to the Equities Account. As of the date of the Liquidation Services Agreement, the Legacy Assets were valued at $36.6 million (the “Target Amount”). The Liquidation Services Agreement, which expires June 30, 2011, provides that we will pay the Management Company a fee of $0.9 million in two installments, which is being amortized over the term of the agreement and will be recorded in “General and administrative expenses.” In addition, in the event that any or all of the Legacy Assets are sold, liquidated or otherwise disposed of and the aggregate net proceeds to us are in excess of the aggregate value of the Legacy Assets as of the date of the Liquidation Services Agreement of $36.6 million (the “Target Amount”), then we will pay the Management Company a success fee equal to 10% of the aggregate net proceeds in excess of the Target Amount.

Aircraft Agreements

Wendy’s/Arby’s and TASCO, LLC (an affiliate of the Management Company) (“TASCO”) entered into an aircraft lease agreement (the “Aircraft Lease Agreement”) for the other aircraft that was previously under a time share agreement. The Aircraft Lease Agreement provides that the Company will lease such corporate aircraft to TASCO from July 1, 2009 until June 30, 2010. The Aircraft Lease Agreement provides that TASCO will pay $0.01 million per month for such aircraft plus substantially all operating costs of the aircraft including all costs of fuel, inspection, servicing and storage, as well as operational and flight crew costs relating to the operation of the aircraft, and all transit maintenance costs and other maintenance costs required as a result of TASCO’s usage of the aircraft. We will continue to be responsible for calendar-based maintenance and any extraordinary and unscheduled repairs and/or maintenance for the aircraft, as well as insurance and other costs. The Aircraft Lease Agreement may be terminated by us without penalty in the event we sell the aircraft to a third party, subject to a right of first refusal in favor of the Management Company with respect to such a sale.

All of these agreements entered into in the second quarter of 2009 were negotiated and approved by the Audit Committee of our Board of Directors, which was advised in the process by independent outside counsel.

Presentation of Financial Information

We report on a fiscal year consisting of 52 or 53 weeks ending on the Sunday closest to December 31. All quarters presented contain 13 weeks. Because our 2009 fiscal year ending on January 3, 2010 will contain 53 weeks, our fourth quarter of 2009 will contain 14 weeks. All references to years and quarters relate to fiscal periods rather than calendar periods.

Results of Operations

Three Months Ended June 28, 2009 Compared with Three Months Ended June 29, 2008

Presented below is a table that summarizes our results, same-store sales and restaurant margins for the 2009 second quarter and the 2008 second quarter. Due to the Wendy’s Merger, the percentage change between these three-month periods is not meaningful.

	Three Months Ended
	June 28,		June 29,
	2009		2008		Change
	(In Millions)
Revenues:
Sales	$	816.2	$	291.3	$	524.9
Franchise revenues		96.5		21.7		74.8
		912.7		313.0		599.7
Costs and expenses:
Cost of sales		686.5		245.0		441.5
General and administrative		112.7		42.1		70.6
Depreciation and amortization		44.7		16.4		28.3
Impairment of long-lived assets		8.7		1.3		7.4
Facilities relocation and corporate restructuring		3.0		-		3.0
Other operating expense, net		0.6		-		0.6
		856.2		304.8