EXHIBIT 99.2
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
The following unaudited pro forma condensed consolidated balance sheets and statements of operations are based upon the historical consolidated financial statements of The Wendy’s Company (“The Wendy’s Company” or the “Company”) (formerly known as Wendy’s/Arby’s Group, Inc.) and Wendy’s Restaurants, LLC (“Wendy’s Restaurants”) (formerly known as (Wendy’s/Arby’s Restaurants, LLC), a 100% owned subsidiary of The Wendy’s Company. Unless the context indicates otherwise, any reference in this report to the “Companies,” “we,” “us,” and “our” refers to The Wendy’s Company together with its direct and indirect subsidiaries, including Wendy’s Restaurants. The unaudited pro forma condensed consolidated financial statements have been prepared to illustrate the effect of the sale by Wendy’s Restaurants of 100% of the common stock of Arby’s Restaurant Group, Inc. (“Arby’s”) to ARG IH Corporation, a wholly-owned subsidiary of ARG Holding Corporation, for $130 million in cash (subject to customary purchase price adjustments) and 18.5% of the common stock of ARG Holding Corporation (through which Wendy’s Restaurants will indirectly retain an 18.5% interest in Arby’s).
The unaudited pro forma condensed consolidated balance sheets as of April 3, 2011 reflect the pro forma effect as if the sale of Arby’s had been consummated on that date. The unaudited pro forma condensed consolidated statements of operations for the three months ended April 3, 2011 and April 4, 2010 and the years ended January 2, 2011, January 3, 2010, December 28, 2008 include each entity’s historical statements of operations, adjusted to reflect the pro forma effect as if the sale of Arby’s had been consummated on December 31, 2007 (the first day of our 2008 fiscal year). The historical consolidated financial statements referred to above for The Wendy’s Company and Wendy’s Restaurants were included in their combined Quarterly Report on Form 10-Q for the quarter ended April 3, 2011 and combined Annual Report on Form 10-K for the year ended January 2, 2011. The accompanying unaudited pro forma condensed consolidated financial information and the historical consolidated financial information presented therein should be read in conjunction with the historical consolidated financial statements and combined notes thereto for The Wendy’s Company and Wendy’s Restaurants described above.
The unaudited pro forma condensed consolidated balance sheets and statements of operations include pro forma adjustments which reflect transactions and events that (a) are directly attributable to the sale, (b) are factually supportable, and (c) with respect to the statement of operations, do not have a continuing impact on consolidated results. The pro forma adjustments are described in the accompanying combined notes to the unaudited pro forma condensed consolidated financial statements.
The Wendy’s Company and Wendy’s Restaurants management have made a preliminary determination of the value of the common stock we received in ARG Holding Corporation. The ultimate amount recorded for the value of this common stock may differ from the amount presented.
The unaudited pro forma condensed consolidated financial information does not reflect future events that may occur after the sale, including potential general and administrative cost savings. The unaudited pro forma condensed consolidated financial information is provided for informational purposes only and is not necessarily indicative of the results of operations that would have occurred if the sale of Arby’s had occurred on December 31, 2007 nor is it necessarily indicative of our future operating results. The pro forma adjustments are subject to change and are based upon currently available information.
1
THE WENDY’S COMPANY AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
April 3, 2011
(In Thousands)
Pro Forma Adjustments | |||||||||||||||
Historical | Sale of Arby's (a) | Other | Pro Forma | ||||||||||||
ASSETS | |||||||||||||||
Current assets: | |||||||||||||||
Cash and cash equivalents | $ | 500,061 | $ | (51,666 | ) | $ | 44,166 | (b) | $ | 622,561 | |||||
130,000 | (d) | ||||||||||||||
Accounts and notes receivable | 84,623 | (20,392 | ) | — | 64,231 | ||||||||||
Inventories | 23,112 | (10,336 | ) | — | 12,776 | ||||||||||
Prepaid expenses and other current assets | 53,783 | (17,783 | ) | — | 36,000 | ||||||||||
Deferred income tax benefit | 54,996 | (6,292 | ) | — | 48,704 | ||||||||||
Advertising funds restricted assets | 85,478 | (12,132 | ) | — | 73,346 | ||||||||||
Total current assets | 802,053 | (118,601 | ) | 174,166 | 857,618 | ||||||||||
Properties | 1,519,962 | (373,149 | ) | — | 1,146,813 | ||||||||||
Other intangible assets | 1,351,418 | (25,430 | ) | — | 1,325,988 | ||||||||||
Goodwill | 888,095 | (17,617 | ) | — | 870,478 | ||||||||||
Investments | 109,941 | — | 19,000 | (d) | 128,941 | ||||||||||
Deferred costs and other assets | 69,272 | (4,706 | ) | — | 64,566 | ||||||||||
Total assets | $ | 4,740,741 | $ | (539,503 | ) | $ | 193,166 | $ | 4,394,404 | ||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||||||
Current liabilities: | |||||||||||||||
Current portion of long-term debt | $ | 17,350 | $ | (9,910 | ) | $ | — | $ | 7,440 | ||||||
Accounts payable | 68,745 | (21,032 | ) | — | 47,713 | ||||||||||
Accrued expenses and other current liabilities | 240,519 | (66,091 | ) | 12,300 | (d) | 202,538 | |||||||||
9,543 | (e) | ||||||||||||||
6,500 | (f) | ||||||||||||||
(233 | ) | (g) | |||||||||||||
Advertising funds restricted liabilities | 85,478 | (12,132 | ) | — | 73,346 | ||||||||||
Total current liabilities | 412,092 | (109,165 | ) | 28,110 | 331,037 | ||||||||||
Long-term debt | 1,526,674 | (183,097 | ) | — | 1,343,577 | ||||||||||
Due to affiliates | — | (9,996 | ) | 44,166 | (b) | — | |||||||||
(34,170 | ) | (c) | |||||||||||||
Deferred income | 39,745 | (14,400 | ) | — | 25,345 | ||||||||||
Deferred income taxes | 430,189 | (6,219 | ) | — | 423,970 | ||||||||||
Other liabilities | 164,928 | (56,619 | ) | — | 108,309 | ||||||||||
Commitments and contingencies | |||||||||||||||
Stockholders’ equity | 2,167,113 | (160,007 | ) | 34,170 | (c) | 2,162,166 | |||||||||
136,700 | (d) | ||||||||||||||
(9,543 | ) | (e) | |||||||||||||
(6,500 | ) | (f) | |||||||||||||
233 | (g) | ||||||||||||||
Total liabilities and stockholders’ equity | $ | 4,740,741 | $ | (539,503 | ) | $ | 193,166 | $ | 4,394,404 |
See accompanying notes to unaudited pro forma condensed consolidated financial statements.
2
THE WENDY’S COMPANY AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands Except Per Share Amounts)
Three Months Ended April 3, 2011 | Three Months Ended April 4, 2010 | |||||||||||||||||||||||||||||||
Pro Forma Adjustments | Pro Forma Adjustments | |||||||||||||||||||||||||||||||
Historical | Sale of Arby's (a) | Other | Pro Forma | Historical | Sale of Arby's (a) | Other | Pro Forma | |||||||||||||||||||||||||
Revenues: | ||||||||||||||||||||||||||||||||
Sales | $ | 756,496 | $ | (247,210 | ) | $ | — | $ | 509,286 | $ | 748,197 | $ | (235,450 | ) | $ | — | $ | 512,747 | ||||||||||||||
Franchise revenues | 91,328 | (18,149 | ) | — | 73,179 | 89,250 | (17,283 | ) | — | 71,967 | ||||||||||||||||||||||
847,824 | (265,359 | ) | — | 582,465 | 837,447 | (252,733 | ) | — | 584,714 | |||||||||||||||||||||||
Costs and expenses: | ||||||||||||||||||||||||||||||||
Cost of sales | 659,788 | (220,966 | ) | — | 438,822 | 641,422 | (210,085 | ) | — | 431,337 | ||||||||||||||||||||||
General and administrative (1) | 103,627 | (27,331 | ) | (370 | ) | (g) | 75,926 | 110,482 | (28,203 | ) | — | 82,279 | ||||||||||||||||||||
Depreciation and amortization | 43,125 | (12,811 | ) | — | 30,314 | 46,326 | (13,894 | ) | — | 32,432 | ||||||||||||||||||||||
Impairment of long-lived assets | 9,612 | (1,715 | ) | — | 7,897 | 11,601 | (11,601 | ) | — | — | ||||||||||||||||||||||
Other operating expense, net | 1,032 | (235 | ) | — | 797 | 1,283 | (339 | ) | — | 944 | ||||||||||||||||||||||
817,184 | (263,058 | ) | (370 | ) | 553,756 | 811,114 | (264,122 | ) | — | 546,992 | ||||||||||||||||||||||
Operating profit | 30,640 | (2,301 | ) | 370 | 28,709 | 26,333 | 11,389 | — | 37,722 | |||||||||||||||||||||||
Interest expense | (34,328 | ) | 4,914 | — | (29,414 | ) | (36,278 | ) | 5,267 | — | (31,011 | ) | ||||||||||||||||||||
Other income, net | 323 | (69 | ) | — | 254 | 1,408 | (212 | ) | — | 1,196 | ||||||||||||||||||||||
(Loss) income from continuing operations before income taxes | (3,365 | ) | 2,544 | 370 | (451 | ) | (8,537 | ) | 16,444 | — | 7,907 | |||||||||||||||||||||
Benefit from (provision for) income taxes | 1,956 | 509 | (137 | ) | (g) | 485 | 5,137 | 779 | (6,392 | ) | (h) | (476 | ) | |||||||||||||||||||
(1,843 | ) | (h) | ||||||||||||||||||||||||||||||
(Loss) income from continuing operations | $ | (1,409 | ) | $ | 3,053 | $ | (1,610 | ) | $ | 34 | $ | (3,400 | ) | $ | 17,223 | $ | (6,392 | ) | $ | 7,431 |
(1) | General and administrative for the three months ended April 3, 2011 includes $2,012 in Arby's strategic alternatives costs for employee retention and other professional fees. |
3
THE WENDY’S COMPANY AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands Except Per Share Amounts)
Three Months Ended April 3, 2011 | Three Months Ended April 4, 2010 | |||||||||||||||||||||
Pro Forma Adjustments | Pro Forma Adjustments | |||||||||||||||||||||
Historical | Sale of Arby's (a) | Other | Pro Forma | Historical | Sale of Arby's (a) | Other | Pro Forma | |||||||||||||||
Basic (loss) income from continuing operations per share: | $ .00 | $ .00 | $ | (.01 | ) | $ | .02 | |||||||||||||||
Diluted (loss) income from continuing operations per share: | $ .00 | $ .00 | $ | (.01 | ) | $ | .02 | |||||||||||||||
Weighted average number of basic shares outstanding: | 418,520 | 418,520 | 443,326 | 443,326 | ||||||||||||||||||
Weighted average number of diluted shares outstanding: | 418,520 | 419,591 | 443,326 | 444,502 |
See accompanying notes to unaudited pro forma condensed consolidated financial statements.
4
THE WENDY’S COMPANY AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
Year Ended January 2, 2011
(In Thousands Except Per Share Amounts)
Pro Forma Adjustments | |||||||||||||||
Historical | Sale of Arby's (a) | Other | Pro Forma | ||||||||||||
Revenues: | |||||||||||||||
Sales | $ | 3,045,317 | $ | (966,236 | ) | $ | — | $ | 2,079,081 | ||||||
Franchise revenues | 371,097 | (74,739 | ) | — | 296,358 | ||||||||||
3,416,414 | (1,040,975 | ) | — | 2,375,439 | |||||||||||
Costs and expenses: | |||||||||||||||
Cost of sales | 2,610,761 | (853,863 | ) | — | 1,756,898 | ||||||||||
General and administrative | 416,606 | (105,341 | ) | — | 311,265 | ||||||||||
Depreciation and amortization | 182,172 | (55,326 | ) | — | 126,846 | ||||||||||
Impairment of long-lived assets | 69,477 | (43,151 | ) | — | 26,326 | ||||||||||
Other operating expense, net | 5,010 | (1,653 | ) | — | 3,357 | ||||||||||
3,284,026 | (1,059,334 | ) | — | 2,224,692 | |||||||||||
Operating profit | 132,388 | 18,359 | — | 150,747 | |||||||||||
Interest expense | (137,229 | ) | 19,022 | — | (118,207 | ) | |||||||||
Loss on early extinuishment of debt | (26,197 | ) | — | — | (26,197 | ) | |||||||||
Investment income, net | 5,261 | — | — | 5,261 | |||||||||||
Other income, net | 3,782 | (1,350 | ) | — | 2,432 | ||||||||||
(Loss) income from continuing operations before income taxes | (21,995 | ) | 36,031 | — | 14,036 | ||||||||||
Benefit from income taxes | 17,670 | (732 | ) | (13,110 | ) | (h) | 3,828 | ||||||||
(Loss) income from continuing operations | $ | (4,325 | ) | $ | 35,299 | $ | (13,110 | ) | $ | 17,864 | |||||
Basic (loss) income from continuing operations per share: | $ | (.01 | ) | $ | .04 | ||||||||||
Diluted (loss) income from continuing operations per share: | $ | (.01 | ) | $ | .04 | ||||||||||
Weighted average number of basic shares outstanding: | 426,247 | 426,247 | |||||||||||||
Weighted average number of diluted shares outstanding: | 426,247 | 427,195 |
See accompanying notes to unaudited pro forma condensed consolidated financial statements.
5
THE WENDY’S COMPANY AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
Year Ended January 3, 2010
(In Thousands Except Per Share Amounts)
Pro Forma Adjustments | |||||||||||||||
Historical | Sale of Arby's (a) | Other | Pro Forma | ||||||||||||
Revenues: | |||||||||||||||
Sales | $ | 3,198,348 | $ | (1,064,106 | ) | $ | — | $ | 2,134,242 | ||||||
Franchise revenues | 382,487 | (79,634 | ) | — | 302,853 | ||||||||||
3,580,835 | (1,143,740 | ) | — | 2,437,095 | |||||||||||
Costs and expenses: | |||||||||||||||
Cost of sales | 2,728,484 | (916,428 | ) | — | 1,812,056 | ||||||||||
General and administrative | 452,713 | (99,767 | ) | — | 352,946 | ||||||||||
Depreciation and amortization | 190,251 | (56,188 | ) | — | 134,063 | ||||||||||
Impairment of long-lived assets | 82,132 | (56,513 | ) | — | 25,619 | ||||||||||
Facilities relocation and restructuring | 11,024 | — | — | 11,024 | |||||||||||
Other operating expense, net | 4,255 | (714 | ) | — | 3,541 | ||||||||||
3,468,859 | (1,129,610 | ) | — | 2,339,249 | |||||||||||
Operating profit | 111,976 | (14,130 | ) | — | 97,846 | ||||||||||
Interest expense | (126,708 | ) | 20,107 | — | (106,601 | ) | |||||||||
Investment expense, net | (3,008 | ) | — | — | (3,008 | ) | |||||||||
Other than temporary losses on investments | (3,916 | ) | — | — | (3,916 | ) | |||||||||
Other expense (income), net | 1,523 | (1,628 | ) | — | (105 | ) | |||||||||
Loss from continuing operations before income taxes | (20,133 | ) | 4,349 | — | (15,784 | ) | |||||||||
Benefit from income taxes | 23,649 | 60,640 | (62,155 | ) | (h) | 22,134 | |||||||||
Income from continuing operations | $ | 3,516 | $ | 64,989 | $ | (62,155 | ) | $ | 6,350 | ||||||
Basic income from continuing operations per share: | $ | .01 | $ | .01 | |||||||||||
Diluted income from continuing operations per share: | $ | .01 | $ | .01 | |||||||||||
Weighted average number of basic shares outstanding: | 466,204 | 466,204 | |||||||||||||
Weighted average number of diluted shares outstanding: | 466,687 | 466,687 |
See accompanying notes to unaudited pro forma condensed consolidated financial statements.
6
THE WENDY’S COMPANY AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
Year Ended December 28, 2008
(In Thousands Except Per Share Amounts)
Historical | Sale of Arby's (a) | Pro Forma | |||||||||
Revenues: | |||||||||||
Sales | $ | 1,662,291 | $ | (1,131,448 | ) | $ | 530,843 | ||||
Franchise revenues | 160,470 | (85,882 | ) | 74,588 | |||||||
1,822,761 | (1,217,330 | ) | 605,431 | ||||||||
Costs and expenses: | |||||||||||
Cost of sales | 1,415,534 | (949,683 | ) | 465,851 | |||||||
General and administrative | 248,718 | (119,560 | ) | 129,158 | |||||||
Depreciation and amortization | 88,315 | (61,206 | ) | 27,109 | |||||||
Goodwill impairment | 460,075 | (460,075 | ) | — | |||||||
Impairment of long-lived assets | 19,203 | (8,002 | ) | 11,201 | |||||||
Facilities relocation and restructuring | 3,913 | — | 3,913 | ||||||||
Other operating expense, net | 653 | (46 | ) | 607 | |||||||
2,236,411 | (1,598,572 | ) | 637,839 | ||||||||
Operating loss | (413,650 | ) | 381,242 | (32,408 | ) | ||||||
Interest expense | (67,009 | ) | 19,462 | (47,547 | ) | ||||||
Investment income, net | 9,438 | — | 9,438 | ||||||||
Other than temporary losses on investments | (112,741 | ) | — | (112,741 | ) | ||||||
Other income (expense), net | 2,710 | (694 | ) | 2,016 | |||||||
Loss from continuing operations before income taxes | (581,252 | ) | 400,010 | (181,242 | ) | ||||||
Benefit from income taxes | 99,294 | (46,013 | ) | 53,281 | |||||||
Loss from continuing operations | $ | (481,958 | ) | $ | 353,997 | $ | (127,961 | ) | |||
Basic and diluted loss from continuing operations per share: | |||||||||||
Common Stock | $ | (3.06 | ) | $ | (.81 | ) | |||||
Class B common stock | $ | (1.26 | ) | $ | (.33 | ) | |||||
Weighted average number of basic and diluted shares outstanding: | |||||||||||
Common Stock | 137,669 | 137,669 | |||||||||
Class B common stock | 47,965 | 47,965 |
See accompanying notes to unaudited pro forma condensed consolidated financial statements.
7
WENDY’S RESTAURANTS, LLC AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
April 3, 2011
(In Thousands)
Pro Forma Adjustments | |||||||||||||||
Historical | Sale of Arby's (a) | Other | Pro Forma | ||||||||||||
ASSETS | |||||||||||||||
Current assets: | |||||||||||||||
Cash and cash equivalents | $ | 181,300 | $ | (51,666 | ) | $ | 44,166 | (b) | $ | 303,800 | |||||
130,000 | (d) | ||||||||||||||
Accounts and notes receivable | 83,854 | (20,392 | ) | — | 63,462 | ||||||||||
Inventories | 23,112 | (10,336 | ) | — | 12,776 | ||||||||||
Prepaid expenses and other current assets | 52,922 | (17,783 | ) | — | 35,139 | ||||||||||
Deferred income tax benefit | 43,274 | (6,292 | ) | — | 36,982 | ||||||||||
Advertising funds restricted assets | 85,478 | (12,132 | ) | — | 73,346 | ||||||||||
Total current assets | 469,940 | (118,601 | ) | 174,166 | 525,505 | ||||||||||
Properties | 1,511,019 | (373,149 | ) | — | 1,137,870 | ||||||||||
Other intangible assets | 1,351,418 | (25,430 | ) | — | 1,325,988 | ||||||||||
Goodwill | 893,372 | (17,617 | ) | — | 875,755 | ||||||||||
Investments | 105,121 | — | 19,000 | (d) | 124,121 | ||||||||||
Deferred costs and other assets | 68,339 | (4,706 | ) | — | 63,633 | ||||||||||
Total assets | $ | 4,399,209 | $ | (539,503 | ) | $ | 193,166 | $ | 4,052,872 | ||||||
LIABILITIES AND INVESTED EQUITY | |||||||||||||||
Current liabilities: | |||||||||||||||
Current portion of long-term debt | $ | 16,072 | $ | (9,910 | ) | $ | — | $ | 6,162 | ||||||
Accounts payable | 67,912 | (21,032 | ) | — | 46,880 | ||||||||||
Accrued expenses and other current liabilities | 239,574 | (66,091 | ) | 12,300 | (d) | 201,593 | |||||||||
9,543 | (e) | ||||||||||||||
6,500 | (f) | ||||||||||||||
(233 | ) | (g) | |||||||||||||
Advertising funds restricted liabilities | 85,478 | (12,132 | ) | — | 73,346 | ||||||||||
Total current liabilities | 409,036 | (109,165 | ) | 28,110 | 327,981 | ||||||||||
Long-term debt | 1,515,728 | (183,097 | ) | — | 1,332,631 | ||||||||||
Due to The Wendy’s Company | 17,486 | (9,996 | ) | 44,166 | (b) | 17,486 | |||||||||
(34,170 | ) | (c) | |||||||||||||
Deferred income | 39,745 | (14,400 | ) | — | 25,345 | ||||||||||
Deferred income taxes | 476,526 | (6,219 | ) | — | 470,307 | ||||||||||
Other liabilities | 152,440 | (56,619 | ) | — | 95,821 | ||||||||||
Commitments and contingencies | |||||||||||||||
Invested equity | 1,788,248 | (160,007 | ) | 34,170 | (c) | 1,783,301 | |||||||||
136,700 | (d) | ||||||||||||||
(9,543 | ) | (e) | |||||||||||||
(6,500 | ) | (f) | |||||||||||||
233 | (g) | ||||||||||||||
Total liabilities and invested equity | $ | 4,399,209 | $ | (539,503 | ) | $ | 193,166 | $ | 4,052,872 |
See accompanying notes to unaudited pro forma condensed consolidated financial statements.
8
WENDY’S RESTAURANTS, LLC AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands)
Three Months Ended April 3, 2011 | Three Months Ended April 4, 2010 | ||||||||||||||||||||||||||||||
Pro Forma Adjustments | Pro Forma Adjustments | ||||||||||||||||||||||||||||||
Historical | Sale of Arby's (a) | Other | Pro Forma | Historical | Sale of Arby's (a) | Other | Pro Forma | ||||||||||||||||||||||||
Revenues: | |||||||||||||||||||||||||||||||
Sales | $ | 756,496 | $ | (247,210 | ) | $ | — | $ | 509,286 | $ | 748,197 | $ | (235,450 | ) | $ | — | $ | 512,747 | |||||||||||||
Franchise revenues | 91,328 | (18,149 | ) | — | 73,179 | 89,250 | (17,283 | ) | — | 71,967 | |||||||||||||||||||||
847,824 | (265,359 | ) | — | 582,465 | 837,447 | (252,733 | ) | — | 584,714 | ||||||||||||||||||||||
Costs and expenses: | |||||||||||||||||||||||||||||||
Cost of sales | 659,788 | (220,966 | ) | — | 438,822 | 641,422 | (210,085 | ) | — | 431,337 | |||||||||||||||||||||
General and administrative (1) | 100,276 | (27,331 | ) | (370 | ) | (g) | 72,575 | 108,760 | (28,203 | ) | — | 80,557 | |||||||||||||||||||
Depreciation and amortization | 42,660 | (12,811 | ) | — | 29,849 | 45,860 | (13,894 | ) | — | 31,966 | |||||||||||||||||||||
Impairment of long-lived assets | 9,612 | (1,715 | ) | — | 7,897 | 11,601 | (11,601 | ) | — | — | |||||||||||||||||||||
Other operating expense, net | 977 | (235 | ) | — | 742 | 1,550 | (339 | ) | — | 1,211 | |||||||||||||||||||||
813,313 | (263,058 | ) | (370 | ) | 549,885 | 809,193 | (264,122 | ) | — | 545,071 | |||||||||||||||||||||
Operating profit | 34,511 | (2,301 | ) | 370 | 32,580 | 28,254 | 11,389 | — | 39,643 | ||||||||||||||||||||||
Interest expense | (34,101 | ) | 4,914 | — | (29,187 | ) | (35,939 | ) | 5,267 | — | (30,672 | ) | |||||||||||||||||||
Other income, net | 283 | (69 | ) | — | 214 | 495 | (212 | ) | — | 283 | |||||||||||||||||||||
Income (loss) from continuing operations before income taxes | 693 | 2,544 | 370 | 3,607 | (7,190 | ) | 16,444 | — | 9,254 | ||||||||||||||||||||||
Benefit from (provision for) income taxes | 332 | 509 | (137 | ) | (g) | (970 | ) | 4,630 | 779 | (6,363 | ) | (h) | (954 | ) | |||||||||||||||||
(1,674 | ) | (h) | |||||||||||||||||||||||||||||
Income (loss) from continuing operations | $ | 1,025 | $ | 3,053 | $ | (1,441 | ) | $ | 2,637 | $ | (2,560 | ) | $ | 17,223 | $ | (6,363 | ) | $ | 8,300 |
(1) | General and administrative for the three months ended April 3, 2011 includes $2,012 in Arby's strategic alternatives costs for employee retention and other professional fees. |
See accompanying notes to unaudited pro forma condensed consolidated financial statements.
9
WENDY’S RESTAURANTS, LLC AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
Year Ended January 2, 2011
(In Thousands)
Pro Forma Adjustments | |||||||||||||||
Historical | Sale of Arby's (a) | Other | Pro Forma | ||||||||||||
Revenues: | |||||||||||||||
Sales | $ | 3,045,317 | $ | (966,236 | ) | $ | — | $ | 2,079,081 | ||||||
Franchise revenues | 371,097 | (74,739 | ) | — | 296,358 | ||||||||||
3,416,414 | (1,040,975 | ) | — | 2,375,439 | |||||||||||
Costs and expenses: | |||||||||||||||
Cost of sales | 2,610,761 | (853,863 | ) | — | 1,756,898 | ||||||||||
General and administrative | 408,419 | (105,341 | ) | — | 303,078 | ||||||||||
Depreciation and amortization | 180,310 | (55,326 | ) | — | 124,984 | ||||||||||
Impairment of long-lived assets | 69,477 | (43,151 | ) | — | 26,326 | ||||||||||
Other operating expense, net | 5,147 | (1,653 | ) | — | 3,494 | ||||||||||
3,274,114 | (1,059,334 | ) | — | 2,214,780 | |||||||||||
Operating profit | 142,300 | 18,359 | — | 160,659 | |||||||||||
Interest expense | (136,193 | ) | 19,022 | — | (117,171 | ) | |||||||||
Loss on early extinguishment of debt | (26,197 | ) | — | — | (26,197 | ) | |||||||||
Other income, net | 2,667 | (1,350 | ) | — | 1,317 | ||||||||||
(Loss) income from continuing operations before income taxes | (17,423 | ) | 36,031 | — | 18,608 | ||||||||||
Benefit from income taxes | 14,785 | (732 | ) | (13,833 | ) | (h) | 220 | ||||||||
(Loss) income from continuing operations | $ | (2,638 | ) | $ | 35,299 | $ | (13,833 | ) | $ | 18,828 |
See accompanying notes to unaudited pro forma condensed consolidated financial statements.
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WENDY’S RESTAURANTS, LLC AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
Year Ended January 3, 2010
(In Thousands)
Pro Forma Adjustments | |||||||||||||||
Historical | Sale of Arby's (a) | Other | Pro Forma | ||||||||||||
Revenues: | |||||||||||||||
Sales | $ | 3,198,348 | $ | (1,064,106 | ) | $ | — | $ | 2,134,242 | ||||||
Franchise revenues | 382,487 | (79,634 | ) | — | 302,853 | ||||||||||
3,580,835 | (1,143,740 | ) | — | 2,437,095 | |||||||||||
Costs and expenses: | |||||||||||||||
Cost of sales | 2,728,480 | (916,428 | ) | — | 1,812,052 | ||||||||||
General and administrative | 442,686 | (99,767 | ) | — | 342,919 | ||||||||||
Depreciation and amortization | 188,506 | (56,188 | ) | — | 132,318 | ||||||||||
Impairment of long-lived assets | 79,956 | (56,513 | ) | — | 23,443 | ||||||||||
Facilities relocation and restructuring | 8,016 | — | — | 8,016 | |||||||||||
Other operating expense, net | 3,239 | (714 | ) | — | 2,525 | ||||||||||
3,450,883 | (1,129,610 | ) | — | 2,321,273 | |||||||||||
Operating profit | 129,952 | (14,130 | ) | — | 115,822 | ||||||||||
Interest expense | (125,392 | ) | 20,107 | — | (105,285 | ) | |||||||||
Other expense, net | (2,973 | ) | (1,628 | ) | — | (4,601 | ) | ||||||||
Income from continuing operations before income taxes | 1,587 | 4,349 | — | 5,936 | |||||||||||
Benefit from income taxes | 8,062 | 60,640 | (62,155 | ) | (h) | 6,547 | |||||||||
Income from continuing operations | $ | 9,649 | $ | 64,989 | $ | (62,155 | ) | $ | 12,483 |
See accompanying notes to unaudited pro forma condensed consolidated financial statements.
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WENDY’S RESTAURANTS, LLC AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
Year Ended December 28, 2008
(In Thousands)
Historical | Sale of Arby's (a) | Pro Forma | |||||||||
Revenues: | |||||||||||
Sales | $ | 1,662,291 | $ | (1,131,448 | ) | $ | 530,843 | ||||
Franchise revenues | 160,470 | (85,882 | ) | 74,588 | |||||||
1,822,761 | (1,217,330 | ) | 605,431 | ||||||||
Costs and expenses: | |||||||||||
Cost of sales | 1,415,530 | (949,683 | ) | 465,847 | |||||||
General and administrative | 213,161 | (119,560 | ) | 93,601 | |||||||
Depreciation and amortization | 85,058 | (61,206 | ) | 23,852 | |||||||
Goodwill impairment | 460,075 | (460,075 | ) | — | |||||||
Impairment of long-lived assets | 9,580 | (8,002 | ) | 1,578 | |||||||
Facilities relocation and restructuring | 3,221 | — | 3,221 | ||||||||
Other operating expense, net | 652 | (46 | ) | 606 | |||||||
2,187,277 | (1,598,572 | ) | 588,705 | ||||||||
Operating (loss) profit | (364,516 | ) | 381,242 | 16,726 | |||||||
Interest expense | (66,925 | ) | 19,462 | (47,463 | ) | ||||||
Other income (expense), net | 3,234 | (694 | ) | 2,540 | |||||||
Loss from continuing operations before income taxes | (428,207 | ) | 400,010 | (28,197 | ) | ||||||
Benefit from income taxes | 63,121 | (46,013 | ) | 17,108 | |||||||
Loss from continuing operations | $ | (365,086 | ) | $ | 353,997 | $ | (11,089 | ) |
See accompanying notes to unaudited pro forma condensed consolidated financial statements.
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THE WENDY’S COMPANY AND SUBSIDIARIES
WENDY’S RESTAURANTS, LLC AND SUBSIDIARIES
COMBINED NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(In Thousands)
Description of Transaction and Basis of Presentation
The unaudited pro forma condensed consolidated balance sheets and statements of operations are based upon the historical consolidated financial statements of The Wendy’s Company (“The Wendy’s Company” or the “Company”) (formerly known as Wendy’s/Arby’s Group, Inc.) and Wendy’s Restaurants, LLC (“Wendy’s Restaurants”) (formerly known as Wendy’s/Arby’s Restaurants, LLC), a 100% owned subsidiary of The Wendy’s Company, which were included in their combined Quarterly Report on Form 10-Q for the quarter ended April 3, 2011 and combined Annual Report on Form 10-K for the year ended January 2, 2011. Unless the context indicates otherwise, any reference in this report to the “Companies,” “we,” “us,” and “our” refers to The Wendy’s Company together with its direct and indirect subsidiaries, including Wendy’s Restaurants. The unaudited pro forma condensed consolidated statements of operations reflect the sale of Arby’s Restaurant Group, Inc. (“Arby’s”) as if the sale had been consummated on December 31, 2007 (the first day of our 2008 fiscal year). The unaudited pro forma condensed consolidated balance sheets as of April 3, 2011 reflect such sale as if it had been consummated on that date.
Pro Forma Adjustments
On July 4, 2011, Wendy’s Restaurants completed the sale of 100% of the common stock of Arby’s to ARG IH Corporation (“Buyer”), a wholly-owned subsidiary of ARG Holding Corporation (“Buyer Parent”), for $130 million in cash (subject to customary purchase price adjustments) and 18.5% of the common stock of Buyer Parent (through which Wendy’s Restaurants will indirectly retain an 18.5% interest in Arby’s). The sale occurred pursuant to the terms of the Purchase and Sale Agreement by and among Wendy’s Restaurants, Buyer Parent and Buyer dated as of June 13, 2011.
The following pro forma adjustments are included in the unaudited pro forma condensed consolidated balance sheet and/or the unaudited pro forma condensed consolidated statements of operations:
(a) | The elimination of Arby’s historical assets, liabilities and equity, and revenues and expenses. |
In accordance with generally accepted accounting principles in the United States, the amounts eliminated on the unaudited pro forma condensed consolidated statements of operations do not include certain indirect corporate overhead included in “General and administrative,” which for segment reporting purposes, had been allocated to Arby’s. In addition, interest expense on Arby’s debt that has been assumed by Buyer has been eliminated; interest expense on the prior Arby’s credit agreement that has not been assumed by Buyer or that is not required to be repaid as a result of the sale has not been eliminated and is included in “Interest expense.”
Certain tax liabilities of Arby’s, including related interest and penalties, are being retained by Wendy’s Restaurants and therefore have not been eliminated from the Companies’ historical balance sheet accounts.
In accordance with Securities and Exchange Commission guidance, the pro forma condensed consolidated statements of operations do not assume any interest income on the estimated net cash proceeds from the sale transaction.
(b) | Excess cash and cash equivalents over an agreed upon amount as of the closing date of the sale transaction, which was transferred from Arby’s to Wendy’s Restaurants. |
(c) | Dividend from Arby’s to Wendy’s Restaurants in settlement of its intercompany account. |
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THE WENDY’S COMPANY AND SUBSIDIARIES
WENDY’S RESTAURANTS, LLC AND SUBSIDIARIES
COMBINED NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(In Thousands)
(d) | The proceeds, net of related transaction costs, and the resulting net gain on the sale of Arby’s as summarized below: |
Cash portion of sale price before customary price adjustments | $ | 130,000 | |||||||||||
Preliminary estimated common stock value (i) | 19,000 | ||||||||||||
Total proceeds | 149,000 | ||||||||||||
Accrued expenses: (see “Nonrecurring and Other Costs” below) | |||||||||||||
Transaction costs | (12,300 | ) | |||||||||||
Net proceeds | 136,700 | ||||||||||||
Net assets sold (ii) | (125,837 | ) | |||||||||||
Gain on sale before income taxes | 10,863 | ||||||||||||
Income tax provision (see (e) below) | (9,543 | ) | |||||||||||
Net gain on sale | $ | 1,320 | |||||||||||
(i) | Management has determined the preliminary estimated fair value of our 18.5% share of the common stock of Buyer Parent. The preliminary value is based on the results of (1) projections regarding the present value of Arby’s future anticipated cash flows (the “income approach”) and (2) Arby’s indicated value based on a comparison and correlation of Arby’s and other similar companies (the “market approach”). | ||||||||||||
The preliminary estimated common stock value is subject to change as a result of many factors including, among others, any changes in Arby’s business plans, changing economic conditions and the competitive environment. Management believes that a change in the assumptions utilized in either the income approach or the market approach would not result in a significantly different preliminary estimated common stock value. | |||||||||||||
(ii) | Arby’s historical stockholders’ equity | $ | 160,007 | ||||||||||
Less: Effect of settlement of intercompany account (see (c) above) | (34,170 | ) | |||||||||||
$ | 125,837 |
(e) | Income taxes related to the estimated pre-tax gain on sale. Income taxes are based on the statutory tax rate effective for the transaction adjusted for the impact of Arby’s non-deductible goodwill. |
(f) | An increase in accrued expenses, net of income taxes, for one-time nonrecurring costs, primarily transaction bonuses and other compensation costs, directly related to the closing of the sale transaction which will be included in the statements of operations of The Wendy’s Company and Wendy’s Restaurants within the 12 months following the closing. (See “Nonrecurring and Other Costs” below for additional information.) |
(g) | The reversal of charges for legal fees, net of income taxes, directly related to the closing of the sale transaction included in The Wendy’s Company and Wendy’s Restaurants historical statements of operations for the three months ended April 3, 2011, which will not have a continuing impact on operations. |
(h) | The effect on income taxes related to the closing of the sale transaction. Beginning in 2009, Arby’s historical financial statements provided a valuation allowance for its net deferred tax assets; such allowance was reversed when Arby’s was consolidated by Wendy’s Restaurants. As a result of the sale transaction, the reversal of Arby’s income tax expense in 2009 and income tax benefit in 2010 and 2011 by Wendy’s Restaurants is not required. |
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THE WENDY’S COMPANY AND SUBSIDIARIES
WENDY’S RESTAURANTS, LLC AND SUBSIDIARIES
COMBINED NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(In Thousands)
Nonrecurring and Other Costs
Included in the calculation of the gain on the sale of Arby’s (see (d) above) are transaction costs which are one-time nonrecurring costs that are directly attributable to the transaction, but are not reflected in the accompanying unaudited pro forma condensed consolidated statements of operations.
Additionally, The Wendy’s Company and Wendy’s Restaurants will incur costs directly related to the closing of the transaction which will be included in the statements of operations of The Wendy’s Company and Wendy’s Restaurants within the 12 months following the closing of the transaction as follows:
• | Transaction bonuses to certain employees of $2,000 |
• | Employee retention bonuses of $5,100 anticipated to be paid within 60 days of closing; |
• | Share-based compensation expense of $1,000 related to accelerated vesting of certain stock options and certain restricted stock and restricted stock units; and |
• | Aggregate compensation costs of $700 paid to two Wendy’s Company and Wendy’s Restaurants corporate executives due to the possible relocation of certain corporate offices. |
In addition, The Wendy’s Company and Wendy’s Restaurants will incur compensation expense of $1,500 for one of our corporate executives should the corporate offices relocate. Should the relocation occur, this amount is expected to be expensed in The Wendy’s Company and Wendy’s Restaurants statements of operations over the three year period following the relocation.
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