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Wendy's International Inc. disclosed Monday that the Special Committee of its Board of Directors, which is reviewing the company's strategic options, has decided to explore a possible sale of the company.  

The company however did not provide a specific timetable for the process.

"The Special Committee has determined that the exploration of a sale is the appropriate next step in the investigation of value-creating alternatives for our stakeholders," said James V. Pickett, Chairman of the Board and the Special Committee.  "While a sale remains only one of the alternatives under consideration, we believe it merits more thorough examination."

"Our goal is to move forward expeditiously and to minimize disruption to the company and its operations," said Mr. Pickett.   "We want management and our operators to focus on executing Wendy's business plan to grow sales and margins."

JP Morgan, as lead advisor, and Lehman Brothers Inc., as co-advisor, will conduct the sale exploration process in conjunction with the Special Committee.

The Special Committee is also evaluating a possible securitization financing.  Such a securitization could be used by a potential buyer or in a recapitalization of the company. Lehman Brothers, as lead structuring advisor, and JP Morgan, as co-structuring advisor, are leading the evaluation on behalf of the Special Committee.

Wendy's says there is no assurance that the steps announced will result in any changes to the company's current plans, or that any transaction will be consummated.  A sale transaction would require approval by the full Board of Directors and shareholders.  In addition, the steps announced do not preclude the possibility of the company pursuing other strategic alternatives in the future.

The company plans to report developments regarding the Special Committee's actions only as circumstances warrant. 

Revised Outlook for 2007

Wendy's said it is revising its 2007 outlook for earnings before interest taxes depreciation and amortization and earnings per share from continuing operations.

The company's revised range for EBITDA is $295-315 million, compared to previous guidance of $330-340 million.  The revised range is a 33-42% increase over 2006 adjusted EBITDA from continuing operations of $221 million.  The company's revised range for EPS is $1.09-1.23 per share, compared to the company's previous guidance of $1.26-1.32 issued on March 20. 

The primary reasons for the revised outlook are lower-than-planned same-store sales and higher-than-expected commodity costs.  Same-store sales were up 3.8% at U.S. company restaurants in the 2007 first quarter and are up 0.7% in the 2007 second quarter through June 15.

The revised earnings outlook excludes expenses related to the Board's Special Committee activities, up to $60 million in pension settlement costs that the company noted in February (some of these costs are expected to occur in 2007), and any potential restructuring charges.

"Our strategy to revitalize the Wendy's(R) brand, improve our bond with customers and generate sustainable same-stores growth is producing positive results," said Chief Executive Officer and President Kerrii Anderson.  "We've delivered 12 consecutive months of positive same-store sales through May, but the last two months have been challenging as we've aggressively adjusted pricing to bring Wendy's more in line with the market.  We believe our new market-based pricing approach is the right long-term strategy to generate more positive store operating margins, but it has pressured transactions in the short-term.  Our employees and operators are producing improved results, but certain external factors have changed and are impacting results.

"Our goal is to keep everyone in the system focused on executing our strategic plan to drive profitable sales and expanded margins at every restaurant," Anderson said.  "Our brand strategy and new advertising will clearly tell consumers about Wendy's superior quality and great-tasting products.  We have been emphasizing our "fresh, never frozen beef" in our newest ads.  At the same time, we are focused on operational improvements across the system and we expect to meet our store labor savings and G&A goals."  

Earnings Outlook and Guidance

The company said that in view of the strategic review process now under way, it is suspending its previous earnings guidance for 2008 and 2009.  Management does not plan to provide additional details on its earnings guidance or to update it.

About Wendy's

Headquartered in Dublin, Ohio, Wendy's International Inc. (NYSE:WEN) -- http://www.wendysintl.com/ -- and its subsidiaries operate, develop, and franchise a system of quick service and fast casual restaurants in the Americas, Asia, the Pacific Rim, Europe and the Middle East.

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As reported in the Troubled Company Reporter on April 30, 2007, Standard & Poor's Ratings Services placed its ratings for Dublin, Ohio-based Wendy's International Inc., including the 'BB+' corporate credit rating, on CreditWatch with negative implications.

Moody's Investors Service placed all ratings of Wendy's International, Inc. on review for possible downgrade, including: Corporate family rating of Ba2; Senior unsecured notes rated Ba2; Senior unsecured shelf registration rated (P)Ba2; Subordinated shelf registration rated (P)Ba3; and Preferred stock shelf registration rated (P)B1.