John D. Barker - Chief Communications Officer and Senior Vice President Stephen E. Hare - Chief Financial Officer and Senior Vice President Emil J. Brolick - Chief Executive Officer, President, Member of The Board of Directors, Member of Executive Committee and Member of Capital & Investment Committee

Michael W. Gallo - CL King & Associates, Inc. Mitchell J. Speiser - The Buckingham Research Group Incorporated Paul Westra - Cowen and Company, LLC, Research Division Nick Setyan - Wedbush Securities Inc., Research Division Howard W. Penney - Hedgeye Risk Management LLC Phillip Juhan - BMO Capital Markets U.S. Yang Huang Carla Casella - JP Morgan Chase & Co, Research Division

Good morning. My name is Tamika, and I will be your conference operator today. At this time, I would like to welcome everyone to The Wendy's Company First Quarter Earnings Conference Call. [Operator Instructions] Thank you. Mr. Barker, you may begin your conference. John D. Barker: Thanks, Tamika. Good morning, everybody. Earlier today, we issued our first quarter 2012 earnings release and we filed our Form 10-Q. The agenda for today will start with a review of our first quarter financial results from our CFO, Steve Hare, and then our President and CEO, Emil Brolick, will give us an update on Wendy's Recipe to Win and the progress that we are making. Finally, we will open up the line for questions after those comments. Today's conference call and our webcast is accompanied by a PowerPoint presentation, which can be found on the Investor Relations page at our corporate website, which is aboutwendys.com. For those of you who are listening by phone today, make sure that you select the appropriate webcast player option from our website, and that will ensure that you can sync up the slides with the audio. Before we begin, I'd like to refer you for just a minute to the Safe Harbor statement that is attached to today's 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 referenced in the Safe Harbor statement that is attached to the news release. Also, some of the comments today will reference non-GAAP financial measures such as adjusted earnings before interest, taxes, depreciation and amortization. Investors should refer to our reconciliations of non-GAAP financial measures to the most directly comparable GAAP financial measure. Now with that, I'd like to turn it over to Steve. Stephen E. Hare: Thank you, John, and good morning. And thank you for joining us today. While our first quarter sales were positive for the fourth consecutive quarter, they were well below our expectations and not strong enough to produce EBITDA results consistent with our plan for 2012. Compounding the challenges created by softer sales was an unfavorable mix of products sold. I will speak to the impact of the W cheeseburger, which along with our anticipated elevated commodity cost, combined to produce a decrease in our year-over-year margin. As a reminder, our business is moderately seasonal. Our first quarter is our weakest, with the second and third quarters representing our higher-volume quarters. Based on our first quarter results, we have revised our adjusted EBITDA outlook for 2012 to a range of $320 million to $335 million. I will provide more perspective on this later. And we are making substantial capital investments that we are confident will drive the long-term profitability and growth of the Wendy's brand. Now let's take a closer look at our first quarter results. North America company-owned same-store sales increased 0.8% in the first quarter. The first quarter sales increase was a result of an increase in average check, partially offset by a slight decrease in transactions. Our franchisees same-store sales increased 0.7% during the quarter. In January, we promoted our My 99 Value Menu with a focus on the Jr. Cheeseburger Deluxe and the Cheesy Cheddar Burger. In February, we returned to the promotion of Dave's Hot 'N Juicy Cheeseburgers. In March, most markets promoted either the North Pacific Cod sandwich or the W cheeseburger. I want to point out that we've revised our reporting methodology for same-store sales during this quarter to more accurately reflect comparable sales performance, which includes the impact of new and reimaged restaurants on a more timely basis. Under the new method, we report Wendy's same-store sales beginning after new restaurants have been opened for at least 15 continuous months and after reimaged restaurants have been reopened for 3 continuous months. Previously, the calculation of same-store sales began after a new or remodeled restaurant had been opened for at least 15 continuous months and as of the beginning of the previous fiscal year. Under the previous methodology, we would have reported a first quarter 2012 same-store sales increase of 0.5%. Wendy's Company restaurant margin was 11.8% for the quarter, reflecting a 160 basis point decrease from the first quarter of 2011. This margin decrease was driven largely by a 220 basis point increase in commodities. Total revenues increased in the first quarter of 2012 by $10.7 million or 1.8% versus the prior year. Adjusted EBITDA for the quarter was $63.9 million, a $9.8 million decrease compared to the first quarter of 2011. Income from continuing operations attributable to The Wendy's Company was $12.4 million, a $12.7 million increase over the first quarter. Reported EPS for the first quarter of 2012 was $0.03 compared to breakeven in the first quarter of 2011 and adjusted EPS was $0.01 compared to $0.02 in the prior year. Now I will go into more detail on income from continuing operations and special items affecting the quarter. Income from continuing operations totaled $12.4 million or $0.03 per share in the first quarter of 2012. Income from continuing operations benefited from the sale of our investment in Jurlique. Jurlique is a company that our predecessor entity invested in when it was a diversified firm active in investments. As a result of this sale, we recorded a net after-tax gain of $18 million and allocated $2.4 million of net income to minority shareholders, which is included in the line item, net income attributable to noncontrolling interest. During the first quarter, we also incurred and adjusted for $3.4 million of facilities and relocation expenses related to the consolidation of our restaurant support centers. Excluding total special items of $9 million or $0.02 per share, our adjusted earnings per share for the first quarter was $0.01. Now let's discuss cash flow. Cash flow used in operations was $15 million for the first 3 months of 2012. This negative cash flow reflects some timing variances, including our Coca-Cola rebate of $20 million received in the second quarter as opposed to the first quarter in prior years. Capital expenditures increased to $47 million and were related primarily to restaurant reimages, maintenance CapEx and new restaurants. We are investing in the business to drive future growth, which is an integral part of our Image Activation program. We received net proceeds of $24.4 million from the sale of our interest in Jurlique. We did not repurchase stock during the quarter, but we returned $7.8 million to our stockholders in dividends. Our next quarterly dividend of $0.02 will be paid June 15 to stockholders of record as of June 1. Before principal payments, our net cash decrease was $50.4 million. We've repaid $6.4 million of our long-term debt. At quarter end, we had a total cash balance of approximately $418 million. Now let's look at our debt capitalization. At the end of the first quarter, our total debt was approximately $1.4 billion and our net debt was under $1 billion. Based on our trailing 12-month adjusted EBITDA, our current net debt multiple is 2.9x. Next, I would like to share an update on our current refinancing. As we mentioned on our fourth quarter 2011 conference call, we are refinancing some of our debt by raising $1.3 billion of new senior secured credit facilities. We are raising $1.1 billion of new secured term loans and $200 million of a new revolving credit facility. We will use the proceeds to repay the current credit facility and tender for or call the Wendy's Restaurants 10% senior notes. We expect to complete our refinancing by July 16. We anticipate this refinancing will generate $25 million in annual interest expense savings, an extension of our debt maturities and improved covenant flexibility. As I have mentioned, we have lowered our outlook for adjusted EBITDA in 2012 to a range of $320 million to $335 million due primarily to lower sales and margin in the first quarter. This range is wider than our previous adjusted EBITDA outlook, but $335 million is at the low end of our original range. We are confident in our A Cut Above brand vision and our Recipe to Win. And we believe we still have an opportunity to achieve the $335 million target in 2012. Longer-term, we continue to target an average annual adjusted EBITDA growth rate in the high single-digit to low double-digit range beginning in 2013. Sales momentum created by the October launch of Dave's Hot 'N Juicy Cheeseburger line and promotion of the Asiago Chicken Club in November was not sustained with the W cheeseburger. In retrospect, the W cheeseburger in December started to show signs of diluting our marketing message and cannibalize some of the success of Dave's Hot 'N Juicy. Still, we were hopeful that our February promotion of Dave's Hot 'N Juicy would help us regain our momentum, but unusually intense competitive couponing and discounting negatively impacted our sales growth. Relative to the competition, our marketing messages were not as impactful as needed. And as a result, we produced positive same-store sales but below our expectations. Now let's take a look at margin. Unfavorable product mix had a negative impact on our margin in the first quarter. In hindsight, the W's recommended price in December of $2.99 was too low, especially considering that it has more beef at 4.5 ounces than the Dave's Hot 'N Juicy with 4 ounces at a recommended price of $3.49. And while we attempted to reposition the W by raising the à la carte price from $2.99 to $3.19 and by promoting it as a combo in March, it did not achieve the desired results. And while the goal of the W was to drive trade up from the $0.99 price value products, it turned out that we saw the opposite effect, causing trade down from our premium hamburgers. The positioning of the W clearly was not what it needed to be. As a result, we will not promote the W again nationally. In addition, with today's consumers looking for value, many have become adept at changing their buying behavior by purchasing fewer or different items to maintain or reduce their total check. While we are disappointed to revise our outlook after the first quarter, we are addressing issues related to improving our performance for the remainder of 2012. We are planning some incremental strategic pricing relative to our original plan and eliminating costs that are not closely tied to our key growth initiatives. And in a few minutes, Emil will talk more about several other actions we are taking to improve our performance. This pyramid illustrates our key long-term growth drivers: growing our core restaurant business in North America by improving our customers' overall restaurant experience; significant investment in Image Activation; new restaurant development; daypart expansion; refinancing; acquisitions and sales of franchise restaurants; and global growth through international expansion. These long-term initiatives support our target for an average annual adjusted EBITDA growth rate in the high single-digit to low double-digit in 2013 and beyond. And now let me turn the presentation over to Emil. Emil J. Brolick: Good morning, and thank you, Steve. I'd like to begin by expressing my personal disappointment that our sales and EBITDA performance in the first quarter was below expectations and reinforce we have been making the marketing and operational changes that will produce positive results in the future. Finding our brand rhythm in this dynamic environment naturally requires us to make refinements to tactics to optimize how we bring the Wendy's brand to life. One of the most visible changes is the introduction of our new ad campaign featuring the tagline, Now That's Better, which has been well-received by consumers. Another example of refining our tactics, we have seen changes in how consumers were accessing price value. So this April, we added direct mail as another media layer to increase brand awareness and to drive trial of core products, including entrée salads, premium chicken sandwiches and cheeseburgers. Coupon users tend to be a different demographic group than our value menu users. Also, I'll show you how our internal metrics indicate restaurant execution is improving. But we know we must elevate the consistency of the Wendy's customer experience. And while our external measurements indicate brand image is improving, changing consumer perceptions requires consistent messaging and execution over a period of time, so the tangible results of this effort will require some time to manifest themselves. 2012 is a transition year. And we are evolving beyond prior thought processes and elevating brand and tactical execution in all functional areas of the business while we simultaneously build a team of 5-star athletes. So why are we confident in our ability to improve our performance? Let's begin with A Cut Above brand positioning. We believe that this is the natural position for the Wendy's brand and the foundation of our Recipe to Win. Our Recipe to Win is our plan to take Wendy's from where we are today to become a growing, vibrant entity that resonates with consumers and produces consistent same-store sales and profit growth. Central to our Recipe to Win are growth platforms, including Image Activation, Heightened asset utilization through daypart expansion, and international expansion; all are designed to drive long-term shareholder value. We have a solid balance sheet, which will become even stronger as the result of our refinancing, giving us the financial resources to fund growth initiatives. We are building people capability and creating a team of 5-star athletes across our entire organization. And finally, we have an iron-willed determination to drive improved performance throughout the entire organization. Our A Cut Above positioning is key to achieving our long-term outlook. We understand consumer reference points have changed. Today's consumers not only have traditional QSR options but they have quick casual options, the new QSRs, which are providing consumers that elevated food experience, a comfortable environment and heightened service standards. We get it. The competitive bar has been raised. Providing consumers a new QSR experience at a QSR price is what A Cut Above says. And our Image Activation initiative is the core dimension to our Recipe to Win. Image Activation is the first proof point as to why A Cut Above will work. And when you visit one of our Image Activation Wendy's restaurants, you will personally experience A Cut Above brand positioning. We understand that it's not as simple as a pretty, new restaurant. We must elevate all the touch points of our brand, including our restaurant, our people experience, our service experience, consistency of food presentation and our brand communications. The end game of reimaging is to reframe how consumers think about and engage with the Wendy's brand, and in so doing, reframe the competition. I mentioned earlier that we are seeing improvement in our brand perceptions, which contributes to our confidence that we are poised to rebound. Let's take a look at a couple of these metrics. First, our advertising awareness levels have improved to the highest level in more than 2 years as we have stated -- started to distinguish ourselves from 2 leading national competitors. Now we must demonstrate that we can sustain this heightened awareness, and in fact, grow it. And as you can see, our ratings for great-tasting hamburgers has increased nicely over the past 3 quarters and has begun to distance us from the 2 leading national QSR hamburger competitors. We own the position of fresh, never frozen North American beef. But we have to more effectively activate this brand attribute in the minds of consumers to make it more compelling point of difference. Our commitment to fresh beef is central to our belief in providing guests with what we call honest food. That's food that is grown, harvested and prepared with integrity. So while we see a definite signs of progress, it's when all the Ps are working in harmony that our Recipe to Win really starts to pay off. I want to briefly update you regarding the progress on each P. One of the most important decisions we make is pricing. And important to mention of our pricing strategy is the evolution of our My $0.99 Value Menu. We are all well aware of the importance of providing both great price, prices and great value to deliver A Cut Above brand promise to all guests. Since the introduction of our Super Value Menu in 1989, the gap between our premium sandwiches and our $0.99 menu has grown increasingly large. Today, our barbell strategy is out of balance with too much weight on the lower end. As I mentioned in January, we are in the process of correcting this. We are committed to providing a differentiated price value offering that allows Wendy's to retain price-sensitive customers while prudently evolving our price value product offering to establish a more logical relationship to our premium hamburger and chicken offerings. During the second and third quarters, we will test a number of changes to My $0.99 Value, with the ultimate goals of retaining price value customers, improving overall margin and repositioning value to be about portion, quality and price. We believe that this will lead to a value proposition that is sustainable over time across company and franchise restaurants. This slide shows what our new $0.99 offering might look like. The evolution of My $0.99 Menu will also include products and prices at value tiers above $0.99. The goal of producing a balanced value offering, with the right prices, right portion size and right quality. Obviously, we still have to prove this out in the market, but recent changes in competitive value menu offerings are a positive sign. Now the place P. The place P is key to our growth and prosperity by contemporizing the Wendy's Restaurants making them more relevant to today's consumers. We have stated our 2011 Image Activation prototype restaurants are all exceeding our expectations and consumer reactions have been extremely positive. Importantly, what we are learning is that everything works better in our newly renovated Image Activation restaurants as we elevate the customer experience to an entirely new level. More specifically, the consumer insights we have collected confirm that Image Activation is delivering a step-change customer experience. Among the most popular features are the welcoming ambience, the fireplaces, lounge seating, booths, Wi-Fi and TVs, the separation between order placement and pickup and the new ordering queue and front counter, which are unique from other QSR experiences. Sales have increased in all channels, pickup window, carry-out and dine-in with the greatest increase in dine-in sales. Our plan for 2012 is to reimage 50 restaurants and build 20 new restaurants with Image Activation designs while expanding the program to select franchisees. In 2013, we plan to accelerate Image Activation with a tiered investment approach. And we are in the process of developing financing sources for franchisees. The pace of reimaging in 2013 will accelerate significantly for company and franchisees alike. The tiered investment approach will allow us to image-activate the Wendy's system as quickly as possible, recognize the range of AUVs and cash flows in our system and will produce the maximum ROI for Wendy's and our franchisees. Now let's talk about people. I strongly believe that our people are our greatest asset and our greatest source of differentiation. The most difficult thing for a competitor to do is to copy a consistently superior service experience. And that's why one of the most important elements of our A Cut Above centers on people first as we work to build the team of 5-star athletes, who will drive heightened performance, innovation and step-change thinking needed to deliver sustained sales and profit growth. We are elevating our people standards in our restaurants as well as in our restaurant support center in Dublin, Ohio. We have made 2 key executive-level hires and 1 key senior-level promotion recently. In March, we welcomed Craig Bahner, our new Chief Marketing Officer, who joined us after a 20-year career in brand and general management at the Procter & Gamble Company. Craig will focus on elevating Wendy's brand positioning with consumers and improving our marketing effectiveness. We are very excited to have Craig with us as the CMO position was vacant for more than 1 year. In April, we hired Scott Weisberg, Chief People Officer. Scott brings more than 20 years of talent management, organization development and strategic business skills to Wendy's having worked at General Mills, Nabisco and PepsiCo, 3 of the world's best-known and most successful consumer product companies. And we also recently announced that Senior Vice President John Peters has officially assumed direct management responsibility for operations of all Wendy's company-owned and franchise restaurants in the United States and Canada. John is an outstanding operator with high standards. As I mentioned a few moments ago, our operating performance continues to improve. This chart shows that our internal SOE scores or Sparkle Operators Evaluation scores hit an all-time high in the first quarter of 2012. And while we are encouraged by this, we know that we must further improve our performance and more consistently keep the Wendy's brand promise of A Cut Above. We are confident that with this trend of operating improvement, we will see these results in top line sales growth. I mentioned earlier that our marketing messages must improve in impact and relevancy. We know we can't outshout the competition, so our strategy is not to attempt to play the same game better, it's to play a completely different game. We believe we took an important step forward in the second quarter with the introduction of our new advertising campaign, which smartly challenges consumer food choices and promotes the benefits of choosing Wendy's. The campaign features 2 consumer champions, each utilized in a way that plays to their unique individual strength. The first consumer advocate is a red-headed consumer advocate who charmingly challenges food lovers' meal choices, so they can discover the better option, Wendy's. She is contemporary, witty, helpful and engaging. And she sets an expectation for the brand experience. These ads use the signature signoff tagline of Now That's Better. We have received frequent mentions and positive feedback via social media about this campaign, which gives us optimism that we are headed in the right direction. We have an extensive consumer research plan in place to provide an intimate understanding of the effectiveness of the red campaign. The second consumer advocate is Wendy Thomas, the brand's namesake and Dave Thomas' daughter. Wendy plays a much different role from our consumer advocate, connecting the traditional values of her father with today's consumers, who are placing greater importance on fresh preparation and honest food. Advertising featuring Wendy Thomas does not correlate to a particular promotional period but will run throughout the calendar year, reinforcing the brand's core value and compelling point of difference in a contemporary way. We are counting on the uniqueness of Wendy's relationship with the brand and her father to separate us out from the QSR competition. In April, we launched the Spicy Guacamole Club and supported it with our first Now That's Better television spot and radio commercial. Spicy Guacamole Club is a great example of building on the core uniquely Wendy's product, the Spicy Chicken Sandwich. The Spicy Guacamole Club was quite successful and has brought large chicken sandwich counts to levels that we have not seen since the third quarter of 2007. We followed this up with a promotion of our new Signature Sides starting April 30. This, too, is an example of A Cut Above positioning coming to life through premium quality products. Wendy's Chili and Baked Potatoes have always differentiated us from the competitors, and we expect the Signature Sides to do the same. After this promotion ends, Chili Cheese Fries will remain on the menu as a permanent item. For the remainder of 2012, we will continue to leverage the quality positioning in our brand with new innovative twists on our heritage products and return to a few seasonal favorites. As I mentioned earlier, we have seen that today's consumer is accessing price value in multiple ways and more frequently. So we recently introduced a new layer of consumer engagement with a direct-mail coupon strategy designed to reinforce Wendy's brand promise message. The goal of this program is to increase brand awareness and drive immediate trial of our core products. We are being very thoughtful with this effort so as to assure the financial success of our coupon strategy while not putting our brand positioning at risk. Another area that we are hard at work on is maximizing the utilization of our restaurant assets through the expansion of dayparts. We know that serving the breakfast daypart represents an important opportunity for future growth. The morning meal is a daypart with the greatest growth in QSR for the last 5 years and projected to grow the most over the next 5 years. The morning meal currently represents 22% of all QSR traffic and 17% of sales. The other related benefit to breakfast is that it provides an entry to 24-hour pickup window service. Our breakfast menu leverages the honest ingredients and authentic preparation that Wendy's is known for. Like our standard menu, our breakfast sandwiches offer distinctive builds and flavors and our size are differentiated from other offerings in the marketplace. We have extended our popular My $0.99 Value Menu to breakfast daypart as we know it is important to our consumers. This week, we also added a new Steel-Cut Oatmeal product in all of our breakfast markets. This is a fantastic product and will be available all day long. We are focused on improving breakfast sales and profitability in the test markets by increasing awareness in trial and driving repeat business. This month, we are expanding our breakfast program to a market in the Northeast. In this particular market, we will have the opportunity to put our program up against well-entrenched brands in a very competitive market. Our work on breakfast and 24-hour operations is designed to define the best consumer, operation and financial way to access this market for company and franchise operators. Breakfast and 24-hour operations offer an opportunity to heighten restaurant utilization and increase consumer access to the Wendy's brand. We continue to see long-term growth potential in international markets. During the first quarter of 2012, we opened 4 new restaurants, including a very high-volume restaurant in Argentina, bringing our international restaurant count to 354. We added 37 new restaurant commitments, bringing our total commitment to 636. In combination, these 2 categories represent almost 1,000 international Wendy's Restaurants. In April, we announced our international development agreement to build 25 restaurants with The Wissol Group. The Wissol Group is one of the largest business groups in Georgia. And over the next 10 years, we'll build 25 restaurants in Georgia and the Republic of Azerbaijan. Wissol is expected to open its first Wendy's restaurant in Tbilisi in 2013. The international team, led by Darrell van Ligten, is following the same Recipe to Win that we have laid out for the North America business. We are evolving the international menus to reinforce A Cut Above positioning with local premium products specific to each country. Beginning in the second quarter, many markets will launch Dave's Hot 'N Juicy Cheeseburgers. We believe, too, that our new campaign, Now That's Better, will resonate with international consumers as well. Now to wrap things up. As Steve mentioned earlier, we are confident in growth layers inherent in our long-term plan and detailed in this pyramid. These growth layers support our target for an average annual adjusted EBITDA growth rate in the high single-digits to low double-digits in 2013 and beyond. In summary, we remain very optimistic about the future of this great Wendy's brand. We know that we want to be A Cut Above it’s the natural position for the Wendy's brand. We know how to get there, it's by following our Recipe to Win. In Image Activation, new restaurant growth, product innovation, breakfast and international, we have the growth platforms to produce long-term shareholder value. We have the financial resources to reinvest in our business. We are building the people capability with 5-star athletes in the field and the restaurant support center. We have a great franchise organization and we have the iron-willed determination to push through the most intense 3-year period of change in the history of the Wendy's brand. John, back to you. John D. Barker: Thanks, Emil. I'll just take a minute to go through some of our upcoming events as we get ready for Q&A here. In May, we will present at the Morgan Stanley Retail Conference on May 23. And then we host our Annual Stockholders Meeting in New York City on May 24. On June 28, as we had mentioned before, we are hosting an Investor Day, and that will be at our support center here in Dublin, Ohio. And then just for your planning purposes, our next release of earnings, second quarter numbers, and that will be on Thursday, August 9. Now just a little more information on our Investor Day. As we previously announced, it will be here on June 28, here in Dublin, Ohio. That day will include presentations from our management team, tours of our Image Activation restaurants that are in Columbus, Ohio, as well as a tour of our innovation center and an opportunity to spend time with our culinary team. We will be emailing formal invitations out in the near future, so watch for that and we will get that out to you. We are ready, Tamika, for moving to the Q&A portion of the call. So if you can ask folks to queue up for questions, we'd appreciate it.

[Operator Instructions] Your first question comes from the line of Michael Gallo with CL King. Michael W. Gallo - CL King & Associates, Inc.: Obviously, it was a difficult quarter for a variety of different reasons. It seems as though you have though the issues from the quarter under control, commodity cost year-over-year just relative to pricing seems like it should get better as the year goes on. It sounded like some of the momentum you're building on, some of the newer products from April with Spicy Chicken Guacamole doing better, it seems like you've got the issues, I guess, under control and you're already starting to see improvement. Is that a fair characterization? Emil J. Brolick: Yes, Michael. This is Emil. What I'm encouraged by as I look at the sales patterns that we are seeing in our business that as we move progressively through the year, each month, our 2-year sales growth has improved every single period. So that continues to be very encouraging. And we're excited about the offering that we have in the marketplace with our Signature Sides, which started on April 30. And so we are optimistic. Michael W. Gallo - CL King & Associates, Inc.: Okay, great. Second question I have just on the remodels, the Image Activation. Any update on -- or any ability to bring that cost down? Is that something that you still expect to be able to do over time? And then if you can give us an update on what kind of franchise interest you're seeing in the current Image Activation process or whether you think you have to bring that cost down meaningfully in order to get significant adoption. Emil J. Brolick: Sure, Michael. I'll start out, and then Steve Hare can jump in as well. But we mentioned that we're going to take what we call a tiered approach to the Image Activation program because, first of all, we want to go as fast as possible and we want to do the maximum percentage of the system that we can. And as you look across a system the size of Wendy's, naturally you have a range of AUV performances and therefore, cash flows. And so not every single restaurant has the capacity to deal with a $750,000 reinvestment. And so we have to take a tiered approach. The idea is that we would likely end up with 3 tiers of investment with most of the reinvestment taking place in the top 2 tiers but also have a lower-end investment tier. And so we believe that, that will accommodate virtually all the situations in our franchise community. There is significant enthusiasm about reinvestment in our franchise community, Michael, because, one, they recognize that we've not reinvested at the pace we need to. And also, anybody that is all aware of what's happening in the restaurant marketplace sees the reinvestment on the part of McDonald's, sees the reinvestment on the part of Burger King, sees the reinvestment that a Taco Bell has done. And any number of other new competitors out there appreciates that this is very important to moving the brand forward. And as I mentioned, what we are seeing is that when you image-activate a restaurant, everything else just seems to work better in the restaurant. Michael W. Gallo - CL King & Associates, Inc.: Okay, Emil. And then just a follow-up on that. I mean, any sense for what the lower tier might cost? Or is that still being hashed out as you work on the remodel prototypes? Emil J. Brolick: Yes. And again, we're-- this is speculative in the sense that we haven't actually designed or built one of these yet. But the target would be the lower end might be in the $300,000 area.

Your next question comes from the line of Mitch Speiser of Buckingham Research. Mitchell J. Speiser - The Buckingham Research Group Incorporated: Forgive me if you've covered this, but the revised full year EBITDA guidance, could you give us what the revised comps and margin guidance are behind that target? Stephen E. Hare: Yes. Mitch, this is Steve. We're not providing specific guidance for the underlying pieces. But clearly, with the first quarter sales coming in at 0.8%, part of the rationale for bringing down the range at this point in time is to reflect what is the slow start to the year. So obviously, I think we're going to be challenged to get to the higher end of the original sales range. We had said 2% to 3% for the year going in, so I think we'll have to work hard to get back to that range. And that's implicit in the lower EBITDA guidance that we've provided. Mitchell J. Speiser - The Buckingham Research Group Incorporated: Okay. And a CapEx target for 2012? Stephen E. Hare: Yes. We have said $225 million. I think we're tracking right to that. As Emil has said that it's really the Image Activation program that's driving that level of CapEx and we're on track for that. So I would anticipate coming in pretty close to that original budget target. Mitchell J. Speiser - The Buckingham Research Group Incorporated: Okay, great. And just my last question, just on the W burger, but it seems to have created more trade down, I guess, than trade up. Just the fact that it has more beef than the more premium sandwiches, can you just give us a sense of what the strategy was behind pricing it lower even though it has more beef in the sandwich? Emil J. Brolick: So here was the thought process, Mitch. And again, we recognized that this was not the right thought process and this was the thought process that was in place. Let me just put it in that context. But the idea was that we know that, as I spoke about in my comments, there is this gap between our $0.99 Value Menu offering and then our premium products. And so part of the thought was can you create almost a mid-tier in terms of pricing and trade consumers up from their $0.99 purchases to those items. Well, the fact is that I personally have consistently seen that those $0.99 shoppers are generally $0.99 shoppers, and you're not likely to be able to move them up to that $2.99 price point. So unfortunately, I think as I mentioned on the last call, what we saw was that on the average transaction check for a W versus the average transaction check for a Dave's Hot 'N Juicy single with cheese, there was about $1.19 difference on those, some of that was price point, some of that was also that the W had very low drag-along sales of French fries and soft drinks with it. So we've tried to make those adjustment. But quite honestly, the positioning of the product was just not the right positioning.

Your next question comes from the line of Paul Westra with Cowen and Company. Paul Westra - Cowen and Company, LLC, Research Division: Just want to go back a little bit on your EBITDA guidance. I mean, is it safe to say that -- I know you already mentioned a little bit that the vast majority seems like all of the EBITDA reduction seemed to come from the first quarter, the first quarter miss. So I guess, if you could give us as much confidence as you can, is it safe to say that your same-store sales momentum seemed to have -- is it implied to pick back up to the range you expect it to? And I guess, looking out, what gives you confidence in returning back to your prior sort of implied 2Q to 4Q outlook? Stephen E. Hare: Paul, I think that what we're looking at, as Emil had talked about, I think with the programs that we've got in place for the remainder of the year, we still think we can get it back, as we said, on the adjusted EBITDA line to the low end of our original estimate, that $335 million. So while we felt compelled to sort of widen the range and indicate a lower possibility, given Q1, at the same time, I still think when we look at the year, we've got 3 quarters ahead of us. I think we still have the chance from a same-store sales point at least to get to the lower end of what our original estimate was. And that would be, I think, very consistent with the trying to come in at that $335 million end of our forecast. But we've got some work to do. Obviously, 0.8% was not what we had anticipated in Q1. But I think we've got the potential to at least get to the lower end of our original sales estimate. Paul Westra - Cowen and Company, LLC, Research Division: But do you confirm that the vast majority of the reduction is a function of the first quarter miss? Stephen E. Hare: Yes. Paul Westra - Cowen and Company, LLC, Research Division: Right. A question on your debt. Just as far as obviously the new program here, is there anything we should read into? Is there a capability if you decide down the road to support some of the franchisees in the Image Activation? I mean, can you give us some details on the 4 other place issues and how much flexibility you can have down the road to spend the money where you want to? Stephen E. Hare: Yes. In terms of the new financing, there are really 2 advantages, I think, to us that we're pretty happy within in terms of getting this financing done. We're scheduled to close right now the retirement of the 10% notes in July. But getting that behind us, I think does 2 things for us. One, I think we estimate the interest savings on an annual basis of about $25 million and so we were very happy to be able to sort of reconfigure our balance sheet and go with a senior secured term loan of $1.1 billion and then to be able to use that at a much lower borrowing rate to get these interest savings and retire the 10% notes. From a flexibility standpoint, market conditions are quite good right now. So I would say, we have been able to extend our maturities out even more. We really only have the 2014 notes that are as a near-term maturity that we have to face. And then from a covenant flexibility, we do have, to your point, considerable flexibility to reinvest in the business the way we see fit. And so we're very happy with that because Image Activation is very important to us. Emil also mentions on the growth pyramid the idea of some franchisee acquisitions; we also have the flexibility to be able to do that. So again, from a financial flexibility standpoint, with $400 million plus of cash on the balance sheet, $200 million revolver, which is higher than our current revolver, I think from a liquidity standpoint, we're in great shape to be able to aggressively reinvest in Image Activation. Paul Westra - Cowen and Company, LLC, Research Division: And obviously seems like a great program. But as far as the more specifically down to -- have you considered at this point yet about providing -- or what your capabilities or options may even be of helping franchisees along the way if and when they start kicking in a material way of their Image Activation efforts? Stephen E. Hare: Yes. In fact, we've got some meetings coming up after today with our franchisees to talk about Image Activation. And that will be one of the topics we'll talk about. Right now, our primary focus, Paul, is talking to lenders, to our franchise system and walking them through the Image Activation program and the returns that we're seeing there and really help them develop financing programs that we can provide access to our system. Because as Emil said, I think we're seeing a lot of interest from franchisee on this and we want to make sure financing is not an obstacle there. So really, our primary thrust at this point is to try to get those terms and availability as widespread as possible for as many of our franchisees. But to the extent that the some incentives from us also make sense, we would definitely consider that as well. Paul Westra - Cowen and Company, LLC, Research Division: Great. And last question, Emil, if you don't mind commenting on, I guess, Craig Bahner's arrival. He's obviously been here a short period of time. But maybe first impressions and maybe why you stepped out of the industry and looked into consumer products and what might -- I guess, Craig's first impressions and maybe some, his first thoughts on where maybe the coupon drop -- or should we be expecting to see any consumer products-type of mentality, if that's a way to frame the question going forward? Emil J. Brolick: Yes. Well, first of all, I think he's off to an outstanding start and he spent his first week here. Immediately, he spent his first week in restaurants just to gain a grounding of what it takes to run a Wendy's Restaurant. And then the next week, he was on board, we had a WNAP meeting, and so he got a chance to meet a lot of our leadership in terms of our franchise community on marketing and advertising. So that was extremely successful. And what I see, Paul, he's already bringing a lot of discipline that we were not where we needed to be in the marketplace. And unfortunately, the lack of those disciplines led to ideas like the W. And so I'm very optimistic about that. In terms of why I went outside, I just simply wanted to find the very best marketing person that I could find. And we were also looking for somebody that had great leadership dimensions. And Craig also held some general management responsibilities at Procter & Gamble, including running one of their businesses in Japan. And so he also has international experience. So I think we have an exceptional marketing person. I think we have an exceptional leader. And he has very, very high standards on people, which is also going to prove to be extremely important. So we're very excited and we're optimistic.

The next question comes from the line of Nick Setyan with Wedbush Securities. Nick Setyan - Wedbush Securities Inc., Research Division: In terms of the cadence or the quarterly cadence of the image reactivation or the remodels for 2012, can you give us a little bit of an idea of sort of what to expect? Is it going to be mostly Q4? Stephen E. Hare: Yes. On the Image Activation and the remodeling aspect of that, we're in process right now. We're going through design and then approval, which takes a little time. But we would expect to start opening these early in the third quarter, and then you'll see significant amount of activity through the third quarter and fourth quarter this year. Nick Setyan - Wedbush Securities Inc., Research Division: Great. And then just in terms of the cadence of product introductions and marketing going forward for the rest of the year, can you give us a bit more color on what gives you confidence that the lower end of the previous same-store sales growth target is achievable? Emil J. Brolick: Yes, this is Emil. And as I look at the calendar, the items that we have on the calendar, we have a strong enough sense for either how they have performed in the past or what their potential is through testing evaluation. That gives us comfort that we can produce those results. And also that, at this point in time, we are optimistic about the new advertising campaign, the red campaign and by having the layer of, I'll call it, the brand equity communications with Wendy Thomas. We remain optimistic about that. As I mentioned in my comments, we have a very extensive research plan in place on both red and Wendy to make sure that we're not talking to ourselves on those, that we’re really getting a consumer perspective on that. So I'm quite optimistic that we're going to keep momentum going and encouraged by the fact that we have seen sequential improvements in same-store sales and 2-year same-store sales as we've progressed throughout the year.

Your next question comes from line of Howard Penney with Hedgeye Risk Management. Howard W. Penney - Hedgeye Risk Management LLC: I have 2 questions. First, Emil, on the $0.99 menu item. I think you said that there's a certain number of consumers that come in specifically for that because, I guess, that's all they can afford. So if you're going to go through the process of sort of moving away from the $0.99 menu, you're again telling consumers or you're going to eliminate a portion of consumers that are currently using Wendy's. And then the second question is -- and then does that factor into your same-store sales guidance? And the second question is with the new marketing position, is he seeing -- I guess, the best way to put it is he given the privilege to come up with a new marketing campaign? Does he have to endorse what's currently out there in the marketplace? I mean, how much leeway are you giving him to say, "Okay, we need to revamp what we're doing because it’s not working and move on?" Emil J. Brolick: Sure. Okay. Well, Howard, first of all, on the $0.99 menu, we are not moving away from the $0.99. We are going to narrow that menu a bit. But the goal is here to go through a testing protocol, so we don't lose a lot of our $0.99 customers in this process because we recognize that there are a lot of consumers out there today who just don't have the financial capacity to visit our restaurants if they can't do it on an attractive price, and we're not anxious to lose those customers. So we're very sensitive to that. But we do think that as the competitive reference points have changed and evolved to more of a tiered approach on price value that begins at $0.99 but then ranges up to, let's call it, $1.89, that we think that there is an opportunity to evolve to this in a way that can retain existing price value customers, enhance our margins. And the other thing, Howard, that's very important here is that we've lost some of the continuity in our system on price value, where there has been a fair number of franchisees that have moved away from this. And we believe that to have continuity on a price value offering in the marketplace is very important. And so we think there are a number of wins. But I certainly don't want to send a message that we're moving away from having a $0.99 menu. And regarding the flexibility that Craig Bahner has as a Chief Marketing Officer, I've made it very clear to Craig that he's in charge and he needs to make the changes necessary to move the business forward. And I don't personally believe in hiring exceptional talent, and then taking the bat out of their hand. So the bat's in his hand and he's got all the green lights he needs. Howard W. Penney - Hedgeye Risk Management LLC: And if I could just ask one more question on capital. I assume the number one use of capital is the Image Activation and reinvesting in the store base. And if that's -- I understand you've got plenty of it. But if that's the case -- or you do have a lot of it, but I think your needs are more than what you have. So if that's the case, why would you pay a dividend and/or buy back stock? Stephen E. Hare: Yes. Howard, this is Steve. Well, one thing that you are seeing us is we have wound down the stock buyback program. The authorization for that ended in the fourth quarter and we do not currently have an authorized program in place. And our intent, as we have said right now, is the primary focus of the reinvestment will be into these growth initiatives and notably, Image Activation, both the remodels as well as new units using those new designs. So that is our clear focus. In terms of the cash dividend that's been in place for a while, we have not increased the rate of the cash dividend. But I think there's a feeling, certainly in discussion with board, that a balance focused primarily on strategic reinvestment but with some balance in terms of return to shareholders is appropriate for us right now.

Your next question comes from the line of Phillip Juhan with BMO Capital Markets. Phillip Juhan - BMO Capital Markets U.S.: Two questions here. One, Steve, can you update us on your food cost inflation expectations as we move through the year and the potential impact to margins from these additional media layers, namely the discounts tied to the mail-outs? And then secondly, can you give us a sense as to the magnitude, the percentage of the franchise base that you're actually targeting for repurchase? Stephen E. Hare: Yes. On the commodities, our guidance for the year was for our basket of commodities a 4% to 5% increase. We think we will still be in that range for the year based on what we've seen. First quarter was pretty intense, 220 basis points of inflation. But overall, we're thinking -- we're still comfortable with that range. Frankly, on beef, which is 20% of our basket, we're actually seeing a little bit of relief there, but I think that's going to be very short-term in nature. I would expect that by the fourth quarter, you'll see beef prices back up. So that keeps us thinking that we'll be in line, hopefully maybe we'll be at the lower end, towards the 4% rather than the 5%. In terms of the additional cost, obviously, the couponing program that Emil touched on does have an additional cost element to it, but we believe that the potential sales lift, we think, will more than offset the additional cost from the coupon program. Emil J. Brolick: Yes. And let me just add on the couponing. While this is a new layer for us, I would not want you to take away from this. This is something that we're going to have these out in the marketplace on a constant basis. We are taking a very prudent approach to this because we have to make sure that they work economically, which we are confident of that. But we also want to make sure that we -- that they work for our brand position as well. So this is not something that we're going overboard on. Stephen E. Hare: And Phillip, on your question around franchisee acquisitions, we don't have a hard and fast rule there. But what we've said in the past is that we are open to exploring some acquisitions of franchisees. What we're really looking to do through that is accelerate Image Activation. So if there's some markets where we think they may be underpenetrated or could use an infusion of capital into those restaurants, we will explore that. And that could cause our ownership percentage to go up from the roughly 21% we're at today. At the same time, we'll also explore some divestitures, too strong franchisees or new franchisees that have the capital and the interest to reinvest alongside of us in this Image Activation program going forward.

Your next question comes from the line of Yang Huang with Sanford Bernstein.

This is Yang in for Sara Senatore. My question is why was the top line softer than competitors in 1Q? And could you comment on the reason that the momentum from 4Q faded a little? Emil J. Brolick: Sure. Well, I think the question regarding our momentum versus competitors is that the harsh reality is that obviously some of the marketing messages the competitors had in the marketplace resonated more strongly with consumers than did our marketing messages. And we certainly feel better about the sequencing of messages that we have throughout the remainder of the year. As I mentioned, Spicy Chicken Guacamole had a very nice experience with our chicken, our large chicken unit counts being the highest we've since late in 2007. And we're off to a nice start with our Signature Sides. Regarding the fourth quarter, if you look back at last year, you'll remember that we had a very nice experience with the Dave's Hot 'N Juicy, and that was followed up by our Asiago Ranch Chicken Club, which we also had a very nice experience on. And then we moved into the W, and obviously, as we have shared with you that, that did not work as had the plan had been. And so that is something that hurt momentum late in that quarter. You recall that for the fourth quarter, I think we're still up 5.1%. So it was a strong quarter. And that December period really hurt us, and then we started the year out with our My $0.99 message, which clearly did not resonate. There was -- as strongly as it needed to be. There was some very, very aggressive discounting in the marketplace at that point in time.

Great. Just one more question. I think you entered Manhattan this quarter for breakfast. Did you have to step up advertising spend for that? Emil J. Brolick: We are not advertising in the Manhattan market at this point in time. We are doing some local activity. But the Northeast market that I mentioned that we were expanding our breakfast test to is in fact not the New York DMA, but it is another DMA that we choose not to mention at this time just because of the competitive activity in the marketplace.

Your final question comes from the line of Carla Casella with JPMorgan. Carla Casella - JP Morgan Chase & Co, Research Division: I've just got one clarification. You mentioned that your basket of commodity or input cost was to increase 4% to 5% this year. Is that the hedged level? And would it be -- you know what the increase would be if you didn't have any hedges in place? Stephen E. Hare: Yes. That will be our actual cost. As you know, we're buying fresh beef. So the ability to hedge that is very, very difficult. So for the most part, around beef, we pretty much are at market there, with about a 3-month lag, as you see the impact of market changes on beef. The other commodities, chicken, we tend to have longer-term contracts and then work with some of our suppliers to hedge. But including all of the impact of hedges on the other commodities, that's consistent with that 4% to 5% range that we've said we think we'll achieve this year. John D. Barker: Okay. Thank you, Tamika. That concludes our analyst call. As many of you know, we'll be talking to many of you in follow-up conversations today. We have a series of calls Steve Hare and myself and Dave Poplar will be doing. If you have additional questions, please reach out to Dave Poplar or myself or send us an email. We will certainly get back to you. Emil J. Brolick: Thank you very much for being in the call. I greatly appreciate it.

Thank you all for participating in today's conference call. You may now disconnect.