Wendy's 2009 Annual Report Download - page 55

Franchise Revenues
We expect that the sales trends for franchised restaurants at Wendy’s and Arby’s will continue to be
generally impacted by many of the same factors described above under “Sales.” Due to the economic
environment and potential franchise closures, contributions to Arby’s local advertising cooperatives may
decrease. The decrease in local marketing activity should be offset by the increase in national media.
Restaurant Margin
Except for the cost of commodities which is not expected to significantly impact the restaurant margins
for Wendy’s and Arby’s in 2010, we expect that the other factors described above which affected restaurant
margin for Company-owned restaurants in 2009 for the Wendy’s and Arby’s brands will continue to impact
restaurant margin in 2010. The Wendy’s restaurant margin is expected to be favorably impacted by a
continuation of the cost controls implemented throughout 2009. We expect that the effect on Arby’s restaurant
margins of the emphasis on everyday value menu items will be significantly offset by a reduction in other
discounted product promotional activity.
General and Administrative
We expect that our general and administrative expenses will decrease in 2010 primarily as a result of the
2009 accrual for the formation of the Wendy’s Co-op as discussed in “Introduction and Executive Overview—
Supply Chain Relationship Agreement,” which will not recur, a decrease in integration costs related to the
Wendy’s Merger and continued merger-related synergies and other cost savings initiatives.
Depreciation and Amortization
We expect that our depreciation and amortization expenses will decrease in 2010 primarily due to the
additional depreciation that resulted from valuation adjustments on long-lived assets from the Wendy’s
Merger, which was recorded in the 2009 first quarter and will not recur, and a reduction in depreciation of
Wendy’s and Arby’s long-lived assets for which we have recorded impairment charges in 2009.
Facilities Relocation and Corporate Restructuring
We do not expect to incur additional facilities relocation and corporate restructuring charges with respect
to the Wendy’s Merger in 2010.
Interest Expense
We expect that our interest expense for 2010 will increase compared to 2009 primarily as a result of the
full year effect of interest expense on the Senior Notes discussed in “Liquidity and Capital Resources—Long-
term Debt” and the effect of increased interest rates under our amended senior secured term loan. These
increases are expected to be partially offset by the effect on interest expense of the 2009 prepayment of the
senior secured term loan and the full year effect of the interest rate swaps discussed in “Liquidity and Capital
Resources—Derivatives.”
Liquidity and Capital Resources
Sources and Uses of Cash for 2009
Cash and cash equivalents (“cash”) totaled $591.7 million at January 3, 2010 compared to $90.1 million
at December 28, 2008. For the year ended January 3, 2010, net cash provided by operating activities totaled
$298.8 million, primarily from the following significant items:
•Our net income of $5.1 million;
•Depreciation and amortization of $190.3 million;
•Impairment of other long-lived assets charges of $82.1 million;
•The write-off and amortization of deferred financing costs of $15.8 million;
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