Wendy's International (WEN)

Goodwill Impairment

       We test the goodwill of our restaurant business for impairment annually during the fourth quarter in conjunction with our annual budgeting and long range forecasting process. We recorded a goodwill impairment loss of $22.0 million for 2003 relating to our Company-owned restaurants, which prior to the RTM Acquisition in 2005 consisted solely of Sybra Stores. Company-owned restaurants are considered to be a separately identified reporting unit even though we acquired the Sybra Stores to enhance the value of the Arby's brand. The impairment loss resulted from the overall effect on cash flows and anticipated cash flows of the Sybra Stores due to stiff competition from new product choices in the marketplace and significant cost increases in roast beef, the largest component for Sybra's menu offerings. In light of the increased competitive pressures and recognizing the unfavorable trend in roast beef costs versus historical averages during 2003, we determined that in evaluating the Company-owned restaurants as a separate reporting unit, the expected cash flows were not sufficient to fully support the carrying value of the goodwill associated with our December 2002 acquisition of the Sybra Stores. For 2004, as well as 2005, we determined that our goodwill was recoverable and did not require the recognition of any additional impairment loss.

       We have evaluated from time to time whether the value of our restaurant business would be enhanced by selectively seeking the sale of certain of our Company-owned restaurants to secure additional multiple unit development agreements with new or existing franchisees. Therefore, we may decide to pursue sales at prices that we would not otherwise consider on a stand-alone basis for our Company-owned restaurant reporting unit, even if the sales could result in impairment charges at the restaurant reporting unit level to long-lived assets, goodwill or both. Moreover, we may conclude that the long-term benefit to the Arby's brand may warrant pursuing certain strategies even though the expected future results under such strategies may not result in positive cash flows for our restaurant reporting unit or for us on a consolidated basis.