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Article by DailyStocks_admin    (09-25-08 03:06 AM)

Filed with the SEC from Sep 11 to Sep 17:

Wendy's International (WEN)
Triarc (TRY) Chairman Nelson Peltz intends to raise his Wendy's holdings. Peltz and affiliated funds own 10.6 million shares (36.4%) of Class A and 13.8 million (21.55%) of Class B. Peltz owns 4.6 million common shares (5.3%).

BUSINESS OVERVIEW

The Company

Wendy’s International, Inc. was incorporated in 1969 under the laws of the State of Ohio. Wendy’s International, Inc. and its subsidiaries are collectively referred to herein as the “ Company ” or “ Wendy’s ”.

The Company is primarily engaged in the business of operating, developing and franchising a system of distinctive quick-service restaurants serving high quality food. At December 30, 2007, there were 6,645 Wendy’s restaurants in operation in the United States and in 19 other countries and territories. Of these restaurants, 1,414 were operated by the Company and 5,231 by the Company’s franchisees.

On March 29, 2006, the Company completed its initial public offering (“ IPO ”) of Tim Hortons Inc. (“ THI ”). A total of 33.4 million shares of THI were offered at an initial per share price of $23.162 ($27.00 Canadian). The shares sold in the IPO represented 17.25% of total THI shares issued and outstanding and the Company retained the remaining 82.75%. On September 29, 2006, the Company completed the spin-off of its remaining 82.75% ownership in THI, the parent company of the business previously reported as the Hortons segment. Accordingly, the results of operations of THI are reflected as discontinued operations for all periods presented. On November 28, 2006 and July 29, 2007, the Company completed the sales of Baja Fresh and Cafe Express, respectively, and accordingly, the results of operations of Baja Fresh and Cafe Express are reflected as discontinued operations for all periods presented. The assets and liabilities of Cafe Express were held for sale at December 31, 2006 and are presented as current and non-current assets and liabilities from discontinued operations as of that date. Baja Fresh and Cafe Express were previously reported as the Developing Brands segment (see Note 10 of the Financial Statements and Supplementary Data included in Item 8 herein).

Operations

Each Wendy’s restaurant offers a relatively standard menu featuring hamburgers and filet of chicken breast sandwiches, which are prepared to order with the customer’s choice of condiments. Wendy’s menu also includes chicken nuggets, chili, baked and French fried potatoes, freshly prepared salads, soft drinks, milk, Frosty dessert, floats and kids meals. In addition, the restaurants sell a variety of promotional products on a limited basis.

The Company strives to maintain quality and uniformity throughout all restaurants by publishing detailed specifications for food products, preparation and service, by continual in-service training of employees, restaurant reviews and by field visits from Company supervisors. In the case of franchisees, field visits are made by Company personnel who review operations, including quality, service and cleanliness and make recommendations to assist in compliance with Company specifications.

Generally, the Company does not sell food or supplies, other than sandwich buns and kids’ meal toys, to its Wendy’s franchisees. However, the Company has arranged for volume purchases of many of these products. Under the purchasing arrangements, independent distributors purchase certain products directly from approved suppliers and then store and sell them to local company and franchised restaurants. These programs help assure availability of products and provide quantity discounts, quality control and efficient distribution. These advantages are available both to the Company and to its franchisees.

The New Bakery Co. of Ohio, Inc. (“ Bakery ”), a wholly-owned subsidiary of the Company, is a producer of buns for Wendy’s restaurants, and to a lesser extent for outside parties. At December 30, 2007, the Bakery supplied 637 restaurants operated by the Company and 2,366 restaurants operated by franchisees. At the present time, the Bakery does not manufacture or sell any other products.

Trademarks and Service Marks of the Company

The Company has registered certain trademarks and service marks in the United States Patent and Trademark Office and in international jurisdictions, some of which include “Wendy’s”, “Old Fashioned Hamburgers” and “Quality Is Our Recipe”. The Company believes that these and other related marks are of material importance to the Company’s business. Domestic trademarks and service marks expire at various times from 2008 to 2018, while international trademarks and service marks have various durations of five to 20 years. The Company generally intends to renew trademarks and service marks which are scheduled to expire.

The Company entered into an Assignment of Rights Agreement with the Company’s Founder, R. David Thomas, and his wife dated as of November 5, 2000 (the “ Assignment ”). The Company has used Mr. Thomas, Wendy’s Founder and who was Senior Chairman of the Board until his death on January 8, 2002, as a spokesperson and focal point for its products and services for many years. With the efforts and attributes of Mr. Thomas, the Company has, through its extensive investment in the advertising and promotional use of Mr. Thomas’ name, likeness, image, voice, caricature, endorsement rights and photographs (the “ Thomas Persona ”), made the Thomas Persona well known in the U.S. and throughout North America and a valuable asset for both the Company and Mr. Thomas’ estate. Under the terms of the Assignment, the Company acquired the entire right, title, interest and ownership in and to the Thomas Persona, including the sole and exclusive right to commercially use the Thomas Persona.

Seasonality

The Company’s business is moderately seasonal. Wendy’s average restaurant sales are normally higher during the summer months than during the winter months. Because the business is moderately seasonal, results for any quarter are not necessarily indicative of the results that may be achieved for any other quarter or for the full fiscal year.

Working Capital Practices

Cash flow from operations, cash and investments on hand, possible asset sales, and cash available through existing revolving credit agreements and through the possible issuance of securities should provide for the Company’s projected short-term and long-term cash requirements, including cash for capital expenditures, potential share repurchases, dividends, repayment of debt, future acquisitions of restaurants from franchisees or other corporate purposes.

Competition

Each company and franchised restaurant is in competition with other food service operations within the same geographical area. The quick-service restaurant segment is highly competitive. The Company competes with other organizations primarily through the quality, variety and value perception of food products offered. The number and location of units, quality and speed of service, attractiveness of facilities, effectiveness of marketing and new product development by the Company and its competitors are also important factors. The price charged for each menu item may vary from market to market depending on competitive pricing and the local cost structure. The Company’s competitive position at its Wendy’s restaurants is enhanced by its use of fresh, never frozen ground beef, its unique and diverse menu, promotional products, its wide choice of condiments and the atmosphere and decor of its restaurants.

Government Regulations

A number of states have enacted legislation which, together with rules promulgated by the Federal Trade Commission, affect companies involved in franchising. Much of the legislation and rules adopted have been aimed at requiring detailed disclosure to a prospective franchisee and periodic registration by the franchisor with state administrative agencies. Additionally, some states have enacted, and others have considered, legislation which governs the termination or non-renewal of a franchise agreement and other aspects of the franchise relationship. The United States Congress has also considered legislation of this nature. The Company has complied with requirements of this type in all applicable jurisdictions. The Company cannot predict the effect on its operations, particularly on its relationship with franchisees, of future enactment of additional legislation. Various other government initiatives such as minimum wage rates and taxes can all have a significant impact on the Company’s performance.

Environment and Energy

Various federal, state and local regulations have been adopted which affect the discharge of materials into the environment or which otherwise relate to the protection of the environment. The Company does not believe that such regulations will have a material effect on its capital expenditures, earnings or competitive position. The Company cannot predict the effect of future environmental legislation or regulations.

The Company’s principal sources of energy for its operations are electricity and natural gas. To date, the supply of energy available to the Company has been sufficient to maintain normal operations.

Acquisitions and Dispositions

The Company has from time to time acquired the interests of and sold Wendy’s restaurants to franchisees, and it is anticipated that the Company may have opportunities for such transactions in the future. The Company generally retains a right of first refusal in connection with any proposed sale of a franchisee’s interest. The Company will continue to sell and acquire Wendy’s restaurants in the future where prudent.

See Notes 7 and 8 of the Financial Statements and Supplementary Data included in Item 8 herein, and the information under “Management’s Outlook” in Item 7 herein for further information regarding acquisitions and dispositions.

Franchised Restaurants

As of December 30, 2007, the Company’s franchisees operated 5,231 Wendy’s restaurants in 50 states, Canada and 19 other countries and territories.

The rights and obligations governing the majority of franchised restaurants operating in the United States are set forth under Wendy’s Unit Franchise Agreement. This document provides the franchisee the right to construct, own and operate a Wendy’s restaurant upon a site accepted by Wendy’s and to use the Wendy’s system in connection with the operation of the restaurant at that site. The Unit Franchise Agreement provides for a 20-year term and a 10-year renewal subject to certain conditions. Wendy’s has in the past franchised under different agreements on a multi-unit basis; however, Wendy’s now generally grants new Wendy’s franchises on a unit-by-unit basis.

The Wendy’s Unit Franchise Agreement requires that the franchisee pay a royalty of 4% of gross sales, as defined in the agreement, from the operation of the restaurant. The agreement also typically requires that the franchisee pay the Company a technical assistance fee. In the United States, the standard technical assistance fee required under a newly executed Unit Franchise Agreement is currently $25,000 for each restaurant.

The technical assistance fee is used to defray some of the costs to the Company in providing technical assistance in the development of the Wendy’s restaurant, initial training of franchisees or their operator and in providing other assistance associated with the opening of the Wendy’s restaurant. In certain limited instances (like the regranting of franchise rights or the relocation of an existing restaurant), Wendy’s may charge a reduced technical assistance fee or may waive the technical assistance fee. The Company does not select or employ personnel on behalf of the franchisees.

Wendy’s has in certain instances in the past offered to qualified franchisees, pursuant to its Franchise Real Estate Development program, the option of Wendy’s locating and securing real estate for new store development and/or constructing a new store. Under this program, Wendy’s obtains all licenses and permits necessary to construct and operate the restaurant, with the franchisee having the option of building the restaurant or having Wendy’s construct it. The franchisee pays Wendy’s a fee for this service and reimburses Wendy’s for all out-of-pocket costs and expenses Wendy’s incurs in locating, securing, and/or constructing the new store. Wendy’s has announced that it does not intend to offer the Franchise Real Estate Development program in the future.

The rights and obligations governing franchisees who wish to develop internationally are currently contained in the Franchise Agreement and Services Agreement (the “ Agreements ”). The Agreements are for an initial term of 20 years or the term of the lease for the restaurant site, whichever is shorter. The Agreements license the franchisee to use the Company’s trademarks and know-how in the operation of the restaurant. Upon execution of the Agreements, the franchisee is required to pay a technical assistance fee. Generally, the technical assistance fee is $25,000 for each restaurant. Currently, the franchisee is required to pay monthly fees, usually 4%, based on the monthly gross sales of the restaurant, as defined in the Agreements.

See Schedule II of this Form 10-K (the page following the signature page), and Management’s Discussion and Analysis and Note 12 of the Financial Statements and Supplementary Data included in Item 8 herein for further information regarding reserves, commitments and contingencies involving franchisees. Advertising and Promotions

The Company participates in two advertising funds established to collect and administer funds contributed for use in advertising through television, radio, newspapers, the internet and a variety of promotional campaigns. Separate advertising funds are administered for Wendy’s U.S and Wendy’s of Canada. Contributions to the advertising funds are required to be made from both company operated and franchise restaurants and are based on a percent of restaurant retail sales. In addition to the contributions to the various advertising funds, the Company, based on a system-wide vote, may require additional contributions to be made for both company operated and franchisee restaurants based on a percent of restaurant retail sales for the purpose of local and regional advertising programs. Required franchisee contributions to the advertising funds and for local and regional advertising programs are governed by the Wendy’s franchise agreement. Required contributions by company operated restaurants for advertising and promotional programs are at the same percent of retail sales as franchised restaurants within the Wendy’s system.

See Note 14 of the Financial Statements and Supplementary Data included in Item 8 herein, for further information regarding advertising.

Personnel

As of December 30, 2007, the Company employed approximately 44,000 people, of whom approximately 42,000 were employed in company operated restaurants. The total number of full-time employees at that date was approximately 6,000. The Company believes that its employee relations are satisfactory.

MANAGEMENT DISCUSSION FROM LATEST 10K

Executive Overview

Wendy’s International, Inc. and subsidiaries (the “ Company ”) completed the initial public offering (“ IPO ”) of Tim Hortons Inc. (“ THI ”) in March 2006, the spin-off of THI on September 29, 2006, the sale of Baja Fresh on November 28, 2006 and the sale of Cafe Express on July 29, 2007. Accordingly, the after-tax operating results of THI, Baja Fresh and Cafe Express appear in the Income from discontinued operations line on the Consolidated Statements of Income for all years presented.

The Company’s reported net income was $87.9 million in 2007 compared to $94.3 million in 2006. The 2007 reported net income declined because THI results were included in the Company’s 2006 results as part of income from discontinued operations, but are not included in the Company’s 2007 results. Income from continuing operations improved $49.6 million, or 134%, from $37.0 million in 2006 to $86.6 million in 2007. The year over year improvement was driven primarily by stronger operating income, which improved $116.7 million, or 289%, over 2006, partially offset by lower interest income of $24.1 million due to lower average cash balances in 2007 compared to 2006 and higher interest expense of $9.3 million on debt associated with the sale of a portion of the Company’s royalty revenues. Both 2007 and 2006 results were impacted by restructuring charges and 2007 results were impacted by costs associated with the Board of Director’s Special Committee, which was formed to investigate strategic options for the Company (see “Management’s Outlook” section below). Excluding the restructuring charges in 2007 and 2006 and Special Committee related charges in 2007 as shown on the Consolidated Statements of Income, 2007 adjusted operating income of $191.4 million was higher than 2006 adjusted operating of $79.2 million by $112.2 million, or 142%. The Company uses adjusted operating income as an internal measure of operating performance. Management believes adjusted operating income provides a meaningful perspective of the underlying operating performance of the business.

The 2007 improved operating income results from continuing operations over 2006 were driven by higher company operated restaurant margins (see below), reduced general and administrative costs of $25.2 million, resulting primarily from the Company’s 2006 cost reduction efforts and lower insurance costs, the absence of 2006 incremental advertising contributions of $25.0 million to the Wendy’s National Advertising Program (“ WNAP ”) that did not recur in 2007 and gains from insurance recoveries of $9.0 million in 2007. Company operated restaurant margins in 2007 improved by 180 basis points over 2006 primarily reflecting positive sales, including menu price increases tied to the Company’s market based pricing strategy, and labor efficiencies. U.S. company operated restaurant margins in 2007 improved by 210 basis points over 2006. The reported company operated restaurant margin basis point improvement would have been higher without the impact of rising commodity prices which negatively impacted U.S. company operated store margins 90 basis points in 2007 compared to 2006.

Other factors that favorably impacted 2007 results compared to 2006 included 2007 store closure charges of $7.3 million, compared to 2006 store closure charges of $16.7 million and a $5.7 million gain related to a 2007 amendment of the Tax Sharing Agreement with THI. These favorable variances in 2007 were partially offset by higher 2007 remodel incentives provided to franchisees of $5.4 million and a 2007 $5.0 million impairment of the Company’s investment in Pasta Pomodoro. In addition, operating income was $7.2 million lower in 2007 because the Company’s 50/50 Canadian restaurant real estate joint venture with THI is no longer consolidated since the spin-off of THI in September 2006. If adjusted operating income did not include the amounts discussed in this paragraph and the incremental advertising contributions to WNAP and gains from insurance recoveries discussed in the previous paragraph, 2007 adjusted operating income of $191.4 million would have been higher by $10.2 million, or $201.6 million, and 2006 adjusted operating income of $79.2 million would have been higher by $41.7 million, or $120.9 million.

One of the key indicators in the restaurant industry that management monitors to assess the health of the Company is average same-store sales. This metric provides information on total sales at restaurants operating during the relevant period and provides a useful comparison between periods. Average same-store sales results for U.S. company operated and U.S. franchised restaurants are listed in the table below. Franchisee operations are not included in the Company’s financial statements; however, franchisee sales result in royalties and rental income which are included in the Company’s franchise revenues.

Company Operated Restaurant Margins

The Company’s restaurant margins are computed as store sales less store cost of sales and company restaurant operating costs, divided by store sales. Depreciation is not included in the calculation of company operated restaurant margins. Company operated restaurant margins improved to 10.7% in 2007 compared to 8.9% in 2006 primarily reflecting positive sales, including menu price increases tied to the Company’s market based pricing strategy, and labor efficiencies. The 2006 company operated restaurant margins improved to 8.9% from 8.6% in 2005, primarily reflecting improvements in cost of sales.

Sales

The Company’s sales are comprised of sales from company operated restaurants, sales of kids’ meal toys to franchisees and sales of sandwich buns from the Company’s bun baking facilities to franchisees. Franchisee sales are not included in reported sales. Of total sales, domestic company store sales comprised approximately 85% in each period presented, while the remainder primarily represented Canadian company store sales.

The $5.4 million increase in sales in 2007 versus 2006 primarily included the impact from a strengthening Canadian dollar of approximately $12 million and the impact of slightly higher average same-store sales at U.S. company operated restaurants, offset by fewer U.S. company operated restaurants open during the year, as the Company closed 22 underperforming company operated restaurants in 2007 and sold a net 45 restaurants to franchisees in 2007. The U.S. sales benefited from menu price increases and additional sales derived from the Company’s new breakfast program.

The $16.2 million increase in sales in 2006 versus 2005 primarily included the impact from a strengthening Canadian dollar of approximately $13 million and the impact of higher average same-store sales at company operated restaurants, offset by fewer U.S. company operated restaurants open during the year, as the Company closed 29 underperforming company operated restaurants in 2006. Total company operated restaurants open at year-end 2007 were 1,414 versus 1,465 at year-end 2006 and 1,502 at year-end 2005.

Franchise Revenues

The Company’s franchise revenues include royalty income from franchisees, rental income from properties leased to franchisees, gains from the sales of properties to franchisees and franchise fees. Franchise fees cover charges for various costs and expenses related to establishing a franchisee’s business.

The $5.5 million increase in franchise revenues in 2007 versus 2006 primarily reflects higher royalties of $6.5 million, due primarily to growth in U.S. franchisee average same-store sales of 1.4% and a stronger Canadian dollar, and $1.0 million in higher gains on sales of stores to franchisees in 2007, partially offset by $3.2 million in lower rental income due primarily to the change in accounting for the Company’s 50/50 Canadian restaurant real estate joint venture with THI. This 50/50 joint venture is no longer consolidated since the spin-off of THI. As a result, rental income received by the joint venture is no longer reflected on the Company’s Consolidated Statements of Income and the Company’s 50% share of the joint venture’s income is recorded under the equity method of accounting in other (income) expense, net.

The $32.4 million decrease in franchise revenues in 2006 versus 2005 primarily reflects $16.8 million in lower rental income due to the sale of sites previously leased to franchisees during 2005 and early 2006. The decrease also reflects the absence of $16.3 million in gains on sales of properties leased to franchisees that occurred in 2005.

Depreciation of Property and Equipment

Depreciation of property and equipment decreased $9.5 million in 2007 and decreased $5.4 million in 2006. The decrease in 2007 versus 2006 reflects the lack of $2.9 million of depreciation from the Company’s 50/50 Canadian restaurant real estate joint venture with THI that is no longer consolidated, a reduction in the number of company operated restaurants and other asset dispositions. The decrease in 2006 versus 2005 primarily reflects a reduction in the number of company operated restaurants.

General and Administrative Expenses

General and administrative expenses decreased $25.2 million, or 10.6%, in 2007 versus 2006. As a percent of revenues, general and administrative expenses were lower in 2007 at 8.7% versus 9.7% in 2006. The dollar and percentage decrease in 2007 reflects lower salaries and benefits of $15.7 million, lower performance-based incentive compensation of $6.8 million, lower insurance cost of $8.0 million due to lower claims and lower professional fees of $4.9 million. These improvements were partially offset by higher equity-based compensation of $3.9 million and higher marketing related expenses of $2.3 million for new product testing.

In 2006, general and administrative expenses increased $16.7 million, or 7.6%, to $237.6 million versus 2005. As a percent of revenues, general and administrative expenses were higher in 2006 at 9.7% versus 9.0% in 2005. The dollar and percent increase in 2006 includes incremental expense for performance-based incentive compensation of $10.9 million, $9.2 million in incremental consulting and professional fees and $7.4 million in higher costs related to breakfast. These increases were partially offset by lower salary and benefit costs of $14.8 million.

Restructuring and Special Committee Related Charges

In 2007 and 2006, the Company accrued restructuring costs of $9.7 million and $38.9 million, respectively, related to its voluntary enhanced retirement plan, reduction in force and professional fees as part of a cost reduction plan. The restructuring charges included $7.4 million and $3.9 million of non-cash pension settlement charges in 2007 and 2006, respectively.

In 2007, the Company recorded $24.7 million of primarily financial and legal advisory fees related to the activities to the Special Committee formed by the Company’s Board of Directors (see “Management’s Outlook” section for a further description). No Special Committee costs were recorded in 2006 or 2005.

Other (Income) Expense, Net

Other (income) expense, net includes amounts that are not directly derived from the Company’s primary business. These include amounts related to store closures, sales of properties to non-franchisees and equity investment income.

Store closing costs

Store closure charges include asset impairments and lease termination costs.

Rent revenue

Rent revenue included in other (income) expense, net represents rent paid by THI to the Company’s 50/50 Canadian restaurant real estate joint venture with THI. After the spin-off of THI on September 29, 2006, this joint venture was no longer consolidated in the Company’s financial statements and only Wendy’s 50% share of the joint venture income is included in other (income) expense, net, under the equity accounting method.

Gain from property dispositions

The 2007 gain from property dispositions reflects the sale of 21 properties and includes $3.2 million of gains related to properties held for sale and also reflects the sale of an additional 40 properties for a gain of $1.8 million. The 2006 gain from property dispositions reflects the sale of 70 properties and includes $5.5 million of gains related to properties held for sale. The 2005 gain from property dispositions includes a gain of $46.2 million related to the sale of 130 Wendy’s real estate properties to a third party for $119.1 million.

Equity investment (income) loss

Equity investment income in 2007 primarily includes income from the Company’s 50/50 Canadian restaurant real estate joint venture with THI. Prior to the fourth quarter of 2006, this joint venture was consolidated. Equity income prior to the fourth quarter of 2006 includes equity (income) losses from other equity investments held by the Company.

Impairment of equity investment

Based on a decline in Pasta Pomodoro operating results, in the fourth quarter of 2007 the Company recorded a $5.0 million impairment of its equity investment in Pasta Pomodoro to reflect an other then temporary decline in the value of the Company’s investment in its Pasta Pomodoro investment in accordance with APB Opinion No. 18, “The Equity Method of Accounting for Investments in Common Stock”. As of December 30, 2007, the Company’s recorded equity investment value in Pasta Pomodoro was $5.8 million and is classified as Other assets in the Company’s Consolidated Balance Sheet.

Gain from Insurance Recoveries

Gain from insurance recoveries reflects insurance recoveries for Hurricane Katrina property damages.

THI tax sharing amendment

In November 2007, the Company executed an amendment to its tax sharing agreement with THI which reduced the Company’s liability to THI by $5.7 million.

Other, net

Other, net in 2007 primarily includes store-level asset write-offs of $5.4 million and severance costs of $1.9 million. Other, net in 2006 primarily includes store-level asset write-offs of $5.5 million and severance costs of $2.4 million, partially offset by favorable legal reserve settlements of $1.5 million.

MANAGEMENT DISCUSSION FOR LATEST QUARTER

Company Operated Restaurant Margins

The Company’s restaurant margins are computed as sales from company operated restaurants less cost of sales from company operated restaurants and company restaurant operating costs, divided by sales from company operated restaurants. Depreciation is not included in the calculation of company operated restaurant margins. Company operated restaurant margins declined to 9.3% in the second quarter and 8.5% year-to-date, compared to 11.8% in the second quarter and 10.3% year-to-date periods in 2007, primarily reflecting higher commodity costs, lower transactions and higher breakfast losses, partially offset by menu price increases and labor efficiencies.

Sales

The Company’s sales are comprised of sales from company operated restaurants, sales of kids’ meal toys to franchisees and sales of sandwich buns from the Company’s bun baking facilities to franchisees. Franchisee sales are not included in reported sales. Of total sales, sales from U.S. company operated restaurants comprised approximately 85% in each period presented, while the remainder primarily represented sales from Canadian company operated restaurants.

The $2.2 million decrease in sales in the second quarter of 2008 versus 2007 is attributable to a decline in the number of company operated restaurants, partially offset by an increase in U.S. average same-store sales of 0.1% in the second quarter of 2008 versus a 0.7% increase in the second quarter of 2007, higher sales in Canada and a stronger Canadian dollar. The $12.2 million decrease in sales year-to-date is due to a decrease of 0.8% in U.S. average same-store sales in 2008 versus a 2.3% increase in 2007 and a decline in the number of company operated restaurants, partially offset by higher sales in Canada and a stronger Canadian dollar. Total company operated restaurants open at June 29, 2008 declined 3% to 1,402 versus 1,444 at July 1, 2007. The decline in company operated stores is due primarily to the sale of stores to franchisees.

Franchise Revenues

The Company’s franchise revenues include royalty income from franchisees, rental income from properties leased to franchisees, gains from the sales of properties to franchisees and franchise fees. Franchise fees cover various costs and expenses related to establishing a franchisee’s business.

The $1.2 million increase in franchise revenues in the second quarter versus 2007 was primarily driven by higher royalties of $2.0 million, reflecting higher franchisee same-store sales in both the U.S. and Canada, an 8% stronger Canadian dollar and a greater number of franchise stores open. Franchise rents were $0.6 million higher in the second quarter, driven primarily by an increase in franchise leased properties. These increases were partially offset by lower gains on sales of properties to franchisees of $1.2 million.

The $3.2 million increase in year-to-date franchise revenues versus 2007 primarily reflects higher royalties of $3.1 million due to higher U.S. and Canadian franchisee average same-store, an 11% stronger Canadian dollar and a greater number of franchise stores open. Franchise rents were $1.5 million higher year-to-date, driven primarily by an increase in franchise leased properties. These increases were partially offset by lower gains on sales of properties to franchisees of $1.4 million. Total franchise restaurants open at June 29, 2008 were 5,223 versus 5,217 at July 1, 2007.

Cost of Sales

Cost of sales includes food, paper and labor costs for company operated restaurants, and the cost of goods sold to franchisees related to kids’ meal toys and from the Company’s bun baking facilities. Of the total cost of sales, U.S. company operated restaurant cost of sales comprised approximately 88% in each period presented, while the remainder primarily represented Canadian company operated restaurants. Overall, cost of sales as a percent of sales increased 170 basis points in the second quarter and 100 basis points year-to-date 2008, from 60.4% in 2007 to 62.1% in 2008 for the quarter and 61.2% in 2007 to 62.2% in 2008 year-to date, respectively.

U.S. 2008 company operated restaurant cost of sales as a percent of U.S. company operated restaurant sales were 60.9% in the quarter and 60.9% year to date, compared to 59.0% in second quarter 2007 and 59.6% year-to-date 2007. U.S. food and paper costs in 2008 were 33.5% of U.S. company operated restaurant sales for the quarter and 33.1% year-to-date, compared with 32.3% in second quarter 2007 and 32.3% year-to-date. The increase in 2008 versus 2007 primarily reflects increased commodity costs, partially offset by menu price increases. Rising commodity prices negatively impacted U.S. company operated store margins 220 basis points in the second quarter 2008 compared to the second quarter 2007 and 210 basis points for the year-to-date.

U.S. 2008 labor costs were 27.4% of U.S. company operated restaurant sales for the quarter and 27.8% year-to-date, compared with 26.7% in 2007 for the quarter and 27.3% for the year-to-date in 2007. The increase in 2008 versus 2007 primarily reflects an average wage increase of approximately 2.7%, less labor sales leverage and incremental breakfast labor, substantially offset by menu price increases and labor cost-saving initiatives.

Company Restaurant Operating Costs

Company restaurant operating costs include costs necessary to manage and operate company restaurants, except cost of sales and depreciation. Of the total company restaurant operating costs, U.S. company stores comprised approximately 90% in each period presented, while the remainder primarily represented Canadian company stores. As a percent of sales, company restaurant operating costs increased to 28.1% and 28.8% in the second quarter and year-to-date periods in 2008, respectively, from 27.3% and 28.2% for the quarter and year-to-date 2007, respectively. The 2008 increase for the quarter primarily reflects higher store bonus accruals, higher costs related to the Company’s new breakfast program and other cost increases, partially offset by lower costs due to fewer company-operated stores. Year-to-date, the 2008 increase primarily reflects higher breakfast costs and general cost increases, partially offset by lower costs due to fewer company-operated stores.

Operating Costs

Operating costs include rent expense and other costs related to properties subleased to franchisees, other franchisee related costs and costs related to operating and maintaining the Company’s bun baking facilities.

The $3.2 million increase in operating costs in the second quarter 2008 compared to 2007 primarily reflects higher breakfast advertising costs to support franchisees of $2.3 million and higher franchisee incentives of $0.8 million. The $6.1 million increase in year-to-date operating costs reflects higher breakfast advertising costs to support franchisees of $3.3 million and higher franchisee incentives of $2.2 million. Spending to support franchisee breakfast advertising began in the second half of 2007.

General and Administrative Expenses

General and administrative expenses decreased $6.1 million, or 11.8%, to $45.3 million in the second quarter 2008 and $3.7 million, or 3.6%, to $98.5 million for the year-to-date. As a percent of revenues, general and administrative expenses for the second quarter 2008 were 90 basis points lower compared to prior year at 7.2% versus 8.1% for the second quarter 2007 and 30 basis points lower for the year-to-date at 8.1% versus 8.4% in 2007. The $6.1 million decrease for the quarter includes lower product testing costs of $3.1 million, lower legal and professional fees of $1.8 million and lower bonus expense of $1.5 million. The $3.7 million decrease year-to-date primarily includes lower bonuses of $5.3 million and lower product testing costs of $3.3 million, partially offset by higher salaries and benefits due to higher headcounts.

Restructuring and Special Com m ittee Related Charges

In second quarter and year-to-date 2008, the Company recognized $1.5 million and $1.7 million, respectively, of restructuring costs, compared to $5.9 million and $6.9 million for the quarter and year-to-date periods in 2007, respectively. These restructuring costs primarily included non-cash pension settlement costs as well as other costs related to the Company’s 2006 voluntary enhanced retirement plan and reduction in force as part of a cost reduction plan. As part of the 2006 plan, the Company decided to terminate its defined benefit plans. In the second quarter of 2007, the Company recognized $5.5 million in pretax non-cash pension settlement charges, of which $4.0 million consisted of a non-cash adjustment identified in the second quarter of 2007 that relates to the first quarter 2007. This adjustment was not material.

In the second quarter and year-to-date 2008, the Company recognized $8.6 million and $15.2 million, respectively, of Special Committee related charges, compared to $4.7 million for the quarter and year-to-date periods in 2007, respectively. These costs are primarily financial, legal advisory and due diligence fees related to the activities of the Special Committee formed by the Company’s Board of Directors (see “Management’s Outlook” section for a further description.)

Other income, net

Other income, net, includes amounts that are not directly related to the Company’s primary business. These include expenses related to store closures, sales of properties to non-franchisees, joint venture income and reserves for legal issues.

Store closure costs

Store closure charges for both quarter and year-to-date include asset impairments and write-offs and lease termination costs.

Equity investment income

Equity investment income primarily includes income from the Company’s 50/50 Canadian restaurant real estate joint venture with Tim Hortons Inc.

Investment distribution

The investment distribution was received from the Company’s cost investment in Catterton Partners.

Interest Expense

The decrease in interest expense of $1.9 million for the second quarter and $5.0 million year-to-date 2008 versus 2007 reflects the pay down of the debt associated with the sale of proximately 40% of the Company’s 2007 royalty stream. This debt was fully repaid in the second quarter of 2008. (For further information on this transaction, see the “Liquidity and Capital Resources” section below).

Interest Income

The decrease in interest income of $0.7 million for the second quarter and $4.0 million year-to-date 2008 versus 2007, primarily reflects a decrease in interest rates as well as a reduction in cash and cash equivalent balances.

Income Taxes

The effective income tax rate for the second quarter and year-to-date periods ended June 29, 2008 was 37.5% and 38.0%, respectively, compared to 38.2% and 36.7% for the comparable periods ended July 1, 2007. The year-to-date period ended July 1, 2007 benefited from tax refund claim discrete events.

The Company has identified approximately $19 million in fees to certain advisors to the Special Committee of the Board of Directors that are directly associated with the proposed transaction, which will be deemed as non-deductible, resulting in approximately $7 million in additional tax expense for the period in which the transaction would occur.

Income (Loss) from Discontinued Operations

The Company completed its sale of Cafe Express on July 29, 2007. Accordingly, the after-tax operating results of Cafe Express now appear as Income (loss) from discontinued operations on the Consolidated Condensed Statements of Income. Income from discontinued operations, net of tax, was zero for year-to-date 2008 and $0.2 million for year-to-date 2007.

COMPREHENSIVE INCOME

Comprehensive income was higher than net income by $2.7 million for the second quarter 2008 and lower than net income by $1.7 million for year-to-date 2008, and higher than net income by $12.3 million and $14.1 million for the second quarter and year-to-date 2007, respectively. The changes in comprehensive income in the second quarter and year-to-date 2008 were comprised of a $1.4 million gain and a $3.5 million loss, respectively, in Canadian foreign translation adjustments. Both the 2008 second quarter and year-to-date comprehensive income included recognition of $1.4 million and $1.8 million, respectively, related to the Company’s pension liability. The second quarter and year-to-date 2007 increases in comprehensive income included $8.6 million and $9.7 million, respectively, in favorable Canadian foreign translation adjustments, and $3.6 million and $4.4 million, respectively, related to the Company’s pension liability. At the end of the second quarter 2008, the Canadian exchange rate was $1.01 versus $1.02 at March 30, 2008 and $.98 December 30, 2007. At the end of the second quarter 2007, the Canadian exchange rate was $1.07 versus $1.15 at April 1, 2007 and $1.17 at December 31, 2006.

FINANCIAL POSITION

Overview

The Company generates considerable cash flow each year from operating income excluding depreciation and amortization. The sale of properties has also provided significant cash to continuing operations over the last three years. The main recurring requirement for cash is capital expenditures. The Company generally generates cash from continuing operating activities in excess of capital expenditure spending.

Share repurchases have been a part of the financial strategy utilized by the Company, and normally these repurchases come from cash on hand, including the cash provided by option exercises. Due to the execution of the Merger Agreement (see “Special Committee and the Announced Definitive Merger Agreement” section below), share repurchases in 2008 are not expected. In the short term, the Company expects cash provided by stock option exercises to decrease because the Company did not grant stock options for the two years prior to 2007 and approximately 4 million options were outstanding as of June 29, 2008.

The Company currently has a $500 million shelf registration and $200 million revolving credit facility, both of which were unused as of June 29, 2008. As of June 29, 2008, the Company was in compliance with the covenants under its revolving credit facility and the limits of its Senior Notes and Debentures. The Company currently anticipates that it will allow its revolving credit facility to expire on September 1, 2008.

The Company maintains a strong balance sheet. Standard & Poor’s and Moody’s rate the Company’s senior unsecured debt BB- and Ba3, respectively. Standard & Poor’s has stated that the Company’s debt ratings remain on credit watch with negative implications. Moody’s has stated that it has placed the Company’s debt ratings on review for possible downgrade (see discussion under “Liquidity and Capital Resources” below).

Comparative Cash Flows

Cash flows from operations provided by continuing operations were $96.5 million compared to $123.5 million for the prior year. The 2008 decrease was primarily due to lower income from continuing operations in 2008 versus 2007 and $1.6 million net tax payments in 2008 versus net tax refunds of $8.7 million in 2007, partially offset by changes in working capital related to the timing of cash receipts and disbursements.

Net cash used in investing activities from continuing operations totaled $54.2 million in 2008 compared to $29.0 million in 2007. The $25.2 million increase in net cash used in 2008 primarily reflects an increase in capital expenditures of $14.0 million, higher acquisitions of franchisees of $2.6 million, lower proceeds from property dispositions of $5.9 million and lower proceeds from insurance of $3.3 million.

Financing activities from continuing operations used cash of $30.9 million in 2008 compared to $337.1 million in 2007. The $306.2 million decrease in 2008 net financing outflows primarily reflects the absence of $298.0 million of share repurchases in 2008 and lower 2008 principal payments on debt obligations of $11.5 million, partially offset by higher 2008 dividend payments of $2.8 million.

Liquidity and Capital Resources

Cash flow from operations, cash and investments on hand, possible asset sales, cash available through existing revolving credit agreements and the possible issuance of securities should provide for the Company’s projected short-term and long-term cash requirements, including cash for capital expenditures, authorized share repurchases, dividends, repayment of debt, future acquisitions of restaurants from franchisees and other corporate purposes. The anticipated expiration of its revolving credit agreement on September 1, 2008 is not expected to impact the Company’s ability to meet its cash requirements prior to the consummation of the Merger Agreement (see “Special Committee and the Announced Definitive Merger Agreement” section below). As of June 29, 2008, the Company had $221.9 million of cash and cash equivalents on its balance sheet.

CONF CALL

John Barker - IR

Thanks, Christy, and good morning, everybody.

The purpose of our investor call and our webcast today is to discuss our 2007 results and to provide an update on our key business initiatives. We released our full-year 2007 earnings as well as our fourth quarter results before the market opened this morning. The news release as well as the financial statements and other investor information is all available, if you don't have it yet, on www.WendysInvest.com.

The agenda for today's conference call will begin with remarks from our CEO and President, Kerrii Anderson. Kerrii will review our financial highlights and discuss our strategic initiatives. After that, Jay Fitzsimmons, our Chief Financial Officer, will discuss the financial details, and then we'll be prepared to take your questions.

Also with us on the conference call today are Chief Operations Officer Dave Near, our Controller Brendan Foley, our Senior Vice President of Marketing Strategy and Innovation, Paul Kershisnik, our Senior VP of Brand Management Bob Holtcamp, and other members of our management team.

Now I'd like to refer you for just a minute to the safe harbor statement that is attached to this morning's news release. Certain information that we may discuss today regarding future performance such as financial goals, plans and development is forward-looking. Various factors could affect the company's results and cause those results to differ materially from those expressed in our forward-looking statements. Some of those factors are set forth in the safe harbor statement that is attached to the release.

Also some of the comments today will reference non-GAAP financial measures such as earnings before interest, taxes, depreciation and amortization, or as we call it, EBITDA. You can find those reconciliations of non-GAAP terms to the most directly comparable GAAP financial measure. They're either in our earnings release or on our web site, either place.

Last Monday the company issued a news release from the Special Committee of our Board. The committee was formed in April of 2007. Jim Pickett, Chairman of the Board and the Special Committee said, "The review process being undertaken by the Special Committee has taken longer than anticipated, primarily due to the continuing turmoil in the financial markets." "However," Mr. Pickett said, "the Special Committee is working diligently to conclude its review of the strategic options, and believes that the process is in its final stages." Mr. Pickett added that, "There is no assurance that the process will result in any changes to the company's current plans or when a specific announcement may be made."

As we have state before, the company will report further developments regarding the Special Committee's actions only as circumstances warrant and as directed by the Special Committee. We will not discuss this matter further on the conference call today. When we get to the Q&A session, please limit your questions to our financial results, our overall business plans, marketing, and operations initiatives.

Now let me turn over to Kerrii.

Kerrii Anderson - CEO and President

Thanks, John, and good morning, everyone.

The results that we released earlier today I believe show improvement in every significant financial category, whether it's sales or profits, store margins and cash flow, and that really occurred as a result of the fact that in 2007 we executed our strategic plan.

In addition, we launched Phase 2 of our plan, focused on growing sales. We achieved significant profit growth at both the corporate level and in our company restaurants, and most importantly, we strengthened the financial foundation of this company.

We drove this performance despite challenges of a rapidly rising commodity cost, a weakening economy and fierce competitive environment. We also delivered this performance in the face of all the distractions of the Special Committee process that John just discussed.

You know, I am so very proud of our franchisees and our company employees for this effort. Together, we produced tremendous improvement in our business, and we're focused on more growth in 2008.

Now what I'd like to do is just share a few of our financial highlights in Q4 2007, and Jay is going to give us a lot more detail.

Our 2007 total adjusted EBITDA from continuing ops increased 38% to $305 million, up from $221 million a year ago. This was above the Wall Street consensus expectations for Wendy's EBITDA of $301 million.

Our EBITDA results exclude the full year expenses related to the Board's Special Committee process, which was $24.7 million, as well as some restructuring charges of $9.8 million.

Our U.S. company operated restaurant EBITDA margin improved 210 business plans to 11% in 2007, reflecting slightly positive same-store sales, labor efficiencies, and improved menu management.

In addition to the financial results, we are very proud of some other achievements in 2007. We added outstanding talent to our executive team with Jay Fitzsimmons as CFO, Tad Wampfler as SVP of Supply Chain, and Paul Kershisnik as the SVP of Marketing Strategy and Innovation.

We also earned three prestigious brand accolades during the year, including "Best Hamburger in the Business" from Zagat, we reclaimed the number one position in QSR Magazine's "Speed of Service" survey, and kept this organization focused on the future and we did this by building on the turnaround that we started in 2006.

Now, as we move forward into 2008, we've continued to execute our strategic plan. We recently launched Phase 2 of our plan, called "Doing What's Right for Our Customers," and 2008 our organization is focused on Wendy's hallmarks of quality and innovation in the four key cornerstones of our business, which is operations, marketing, people and our facilities.

You know, if you really look at it, the hallmarks of quality and innovation have historically set Wendy's apart from our competition, and in the future we are determined to deliver breakthrough products that distinguish Wendy's from our competition. That's our heritage, and that's what will bring more customers into our restaurants.

Phase 2 of our plan focused on growth drivers in the areas of core hamburgers, chicken, salads, as well as our long-term value strategy of beverages, snacks, late-night and yes, breakfast.

In the first half of '08 we plan to feature new quality products like our new Premium Codfish Sandwich that is in our stores this month, and in fact, we're advertising it on national TV beginning today. We also have extensions of our very popular Baconator, Frosty brand extensions, as well as new snack items.

As for breakfast, we have added our new breakfast menu in approximately 1,000 restaurants in over 86 markets, and about 35% of the stores are franchise owned. We continue to focus our resources on a small group of fully implemented breakfast markets, and we are determined to follow a disciplined approach with breakfast to ensure a profitable path for this major opportunity.

All these products and opportunities have something in common Wendy's superior quality to drive sales. In late January - in fact, just a week ago we held our franchise convention to share details about our new system in 2008 and beyond that focus on improvements in all areas of our business. We had more than 2,600 franchisees, employees, suppliers in attendance in Orlando, and I am very pleased with the franchise turnout and their participation.

It was an extremely important event for our organization in an effort to build system unity, focus everyone in the organization on driving our business, and update our operators about the most important programs scheduled for 2008. And yes, to also celebrate Wendy's very special culture.

While at the convention we announced that we are evolving our advertising, and we unveiled our new TV ads. The ads will invite customers into our restaurants. They will spotlight our superior quality food, and make you hungry. They will leverage Wendy in a way that is genuine and true to our brand, and when I speak to Wendy, I mean, the Wendy icon. The TV ads open and close with an animated version of our familiar logo, the image of Wendy. She's a little girl who represents the daughter of our founder, Dave Thomas. Most importantly, the ads also feature close-ups of our Wendy's delicious high quality food.

We do believe that the food, for Wendy's, is a clear point of difference between us and our competition, and we will spotlight our fresh, never frozen, beef, center-cut chicken breasts, our fresh toppings, our freshly made salads, and our premium codfish sandwiches and chilli that's made every day in our restaurants.

The advertising begins today on national TV and will be supported with a fully integrated plan for radio, billboards, Internet and our in-store merchandising. Furthermore, this campaign will be central to our strategy of highlighting Wendy's superior quality in everything we do.

Finally, we are committed to fiercely protecting this great brand and positioning it for future growth and profit. We had both achievements and challenges over the last year, and I know many of you - our shareholders - are frustrated with the length of the Special Committee process and the fact that there has been little public communication from the committee. As John's already said, the Special Committee is working diligently to conclude its review of strategic options and the committee will comment as circumstances warrant.

In the meantime, our management continues to focus on what we can control the business and our plans to improve it. We are optimistic about the future, although the first part of 2008 looks challenging due to economic headwinds and rising commodity costs. Despite the macro issues, we are focused on building momentum, driving transactions, and growing store profit margins.

We have a very powerful brand, and as we align all of our resources and initiatives, I believe Wendy's is poised to grow sales, transactions and profits in every restaurant.

So with that, I'd like to turn it over to Jay to review some of our key financial results.

Jay Fitzsimmons - CFO

Thanks, Kerrii. First I'll comment on some of our key financial results.

Excluding expenses related to the Board's Special Committee and restructuring charges, we reported 2007 adjusted income from continuing operations of $108 million. That's up 50% from the $72 million a year ago.

Adjusted EPS on a diluted basis was $1.20 for the full year, and that's up 94% to $0.62 a year ago.

And adjusted EBITDA for the year increased 38% to $305 million.

As previously reported, same-store sales at U.S. franchise-operated restaurants increased 1.4% for the year compared to a 0.6% number a year ago. Our franchisees have produced seven consecutive quarters of positive same-store sales growth.

As we previously reported, U.S. company operated same-store sales increased 0.9% for the year. That compared to a 0.8% increase last year.

If we'd look at it on a two-year basis, the company's same-store sales growth averaged 1.7%.

Sales were impacted positively by breakfast sales, improved menu management which includes things like our three-tier combos, the Baconator, value meal, combo upgrades and menu price increases. It's also partially offset by negative transactions compared to a year ago.

We are encouraged by our 2007 results, but we recognize that further opportunities exist to grow top line sales and improve operating margins in 2008. As Kerrii said, we have a strategic plan and new initiatives in place to generate even better results in 2008.

The 2007 income statement in our detailed appendix to the earnings release demonstrates the excellent cost controls achieved in a difficult environment.

Now I'll highlight some of the key items on the 2007 P&L.

Cost of sales were $1.32 billion, or 61.2% of sales. That's down from the $1.35 billion or 62.8% of sales year before. The improvement as a percent of sales was driven by improved menu management and labor efficiency. These improvements were partially offset by higher commodity costs, which impact U.S. margins by 90 basis points for the year.

G&A - in 2007, G&A decreased 100 basis points as a percent of revenue from the 2006 results. This is primarily the result of the company's next chapter reorganization completed in 2006. We also benefited from lower insurance costs and bonus expense.

Interest expense was higher in 2007 as a result of the sale of 2007 royalties that was entered into in 2006. In 2006, the company received $94 million in return for 2007 future royalties. The $94 million was accounted for as debt in 2006. In 2007, the repayment of the royalty related debt was accounted for as a typical loan comprising both the repayment of debt and the recording of interest expense. As a result, interest expense is up in 2007.

Now I will describe the significant items that affect the comparability of 2007 results to 2006, and there are a lot of them. This information is provided in detail in the appendix to the earnings release for the year and the fourth quarter.

All of the following comments refer to your full year 2007 and 2006 results:

We incurred Special Committee charges of $24.7 million in 2007. These charges did not occur in 2006.

We had restructuring costs of $9.8 million in 2007 which includes $7.4 million in pension settlement charges. This compares to $38.9 million in restructuring costs in 2006.

The company made a special advertising contribution of $25 million in incremental pre-tax advertising expense in 2006 which impacted the operating cost line on the income statement. This did not recur in 2007.

And in 2007, we did not have the [Tim-Wen] joint venture income of $7.2 million, which impacted several lines on the income statement in 2006.

Excluding these items, adjusted EBITDA was $305.4 million in 2007, and that compares to $220.7 million a year ago. This represents a 38% increase over 2006.

We also had other significant items affecting comparability for the year:

Insurance gains related to Hurricane Katrina of $9 million in 2007, which impacted the other income line. These gains did not occur in 2006.

We had store closure charges of $7.3 million in 2007, which compares to $16.7 million in 2006. And this impacted the other income line in both years.

We paid franchise incentives of $6.4 million in 2007, which impacted the operating cost line. This compares to $1.1 million in 2006. These expenses were established to encourage franchisees to remodel and upgrade their restaurants.

A gain from the Tim Horton's tax agreement of $5.7 million impacted the other income line in 2007. This gain did not occur in 2006.

Finally, we recorded a Pasta Pomodoro impairment charge of $5 million in 2007 which also impacted the other income line. This charge did not occur in 2006.

Now a couple of quick comments on the fourth quarter:

Excluding expenses related to the Board's Special Committee and restructuring charges, we reported fourth quarter adjusted EBITDA from continuing operations of $57 million, up 48% from the $38 million a year ago.

And adjusted EPS on a diluted basis was $0.21 for the fourth quarter, up 50% compared to the $0.14 a year ago.

We have provided a detailed review of the fourth quarter in the appendix.

Finally, I'll take a minute to talk about 2008.

As previously announced, we do not plan to provide detailed guidance until the completion of the Special Committee process. That said, we expect a challenging first quarter of the year due to consumers' nervousness about the economy and the current slowdown in restaurant spending.

In addition, we continue to see commodity price increases in 2008 which we plan to offset with menu price increases and further cost reductions.

Higher grain prices and petroleum are expected to keep food cost increasing in 2008. For instance, compared to last year, 2008 corn futures are up approximately 42%, wheat futures are up 17%, and soybeans are up 45%.

For the year, food and paper costs are expected to increase in the range of 140 to 180 basis points compared to 2007, or about 3.5% to 5% as a percent of food cost. For example, beef should be up around 3% to 4% and chicken as much as 5% to 8%.

We expect store closure costs in the fourth quarter of - in the first quarter, excuse me - of 2008 in the range of $5 to $10 million. In 2007, we had store closure charges of $7.3 million for the full year, which impacted the other income line on the income statement. So again, in the first quarter of 2008, our estimate for store closure costs is $5 to $10 million.

In addition, the expenses for the January franchise convention will be recorded in the first quarter of 2008. The first quarter of 2007 did not include any similar expenses.

It's important to note historically we would expect 20% of full year EBITDA in each of the first and fourth quarters of the year, and about 30% of our EBITDA in each of the second and third quarters, due primarily to the seasonality of our business. We believe that the first quarter of 2008 will experience more pressure due to the facts previously mentioned.

As you think about Wendy's 2008 EBITDA, I would encourage you to consider all of the nonrecurring items I just discussed.

Finally, although we are not going to provide you with detailed earnings guidance for 2008, we are comfortable in saying that we expect our 2008 EBITDA to be near the lower end of current analyst estimates on first call, and that's excluding Special Committee charges, restructuring charges, and pension settlement charges. The analyst estimates for 2008 as of Friday range from a low of $324 million to a high of $358 million. Again, we believe it is prudent to expect our performance near the lower end of that range.

If the Board of Directors decides that Wendy's should continue to operate as a public company, we would plan for a conference call or meeting to provide more detailed information about our outlook for 2008 in the longer term.

Thank you. Now let me turn it back to John.

John Barker - IR

Thanks, Jay. A couple of notes before we open up the phone lines for questions.

First, the Board of Directors has approved our 120th consecutive quarterly dividend, and that will be paid on February 29 to shareholders of record as of February 14. The quarterly payment will be $0.125 per share, and this is our fifth dividend payment since the Board voted to increase our annual dividend rate by 47% from $0.34 previously to $0.50 per share.

And as I mentioned at the beginning of the call, the company will report further developments regarding the Special Committee's action only as circumstances warrant. We do not intend to discuss this matter further on the conference call today. Please focus your questions on the financial results that we just reviewed as well as the business initiatives, marketing and operations.

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