- Continuing operations net income was $4.1 million and EBITDA were $42.8 million
DUBLIN, Ohio, April 24 /PRNewswire-FirstCall/ -- Wendy's International, Inc. (NYSE:WEN) today announced its financial results for the first quarter of 2008, which ended on Sunday, March 30.
Including 2008 pre-tax expenses related to the Board of Director's Special Committee of $6.7 million and $0.2 million of pre-tax restructuring charges, the Company reported for the first quarter of 2008: - Income from continuing operations of $4.1 million, compared to
$14.5 million for the first quarter of 2007;
- Diluted earnings per share (EPS) from continuing operations of $0.05,
compared to $0.15 per share for the first quarter of 2007; and
- Earnings before interest, taxes, depreciation and amortization (EBITDA)
from continuing operations of $42.8 million, compared to $57.0 million
for the first quarter of 2007.
The Company did not incur any Special Committee expense in the first quarter of 2007.
Excluding 2008 expenses related to the Board's Special Committee and restructuring charges and excluding 2007 restructuring charges, the Company reported for the first quarter of 2008: - Adjusted income from continuing operations of $8.4 million, compared to
$15.1 million for the first quarter of 2007;
- Adjusted diluted EPS from continuing operations of $0.10, compared to
$0.16 per share for the first quarter of 2007; and
- Adjusted EBITDA from continuing operations of $49.7 million, compared
to $58.0 million for the first quarter of 2007.
Including expenses Excluding expenses(i)
1Q 2008 1Q 2007 1Q 2008 1Q 2007
Income from
continuing
operations $4.1 million $14.5 million $8.4 million $15.1 million Diluted EPS
from continuing
operations $0.05 $0.15 $0.10 $0.16 EBITDA from
continuing
operations $42.8 million $57.0 million $49.7 million $58.0 million (i) See reconciliations below. Adjusted income from continuing
operations, EBITDA and EPS excludes expenses related to the Board's
Special Committee and restructuring charges. There were several unusual items affecting the comparability of 2008 first-quarter adjusted results to a year ago, including higher 2008 breakfast investments of $4.2 million, higher 2008 legal fees and reserves of $1.6 million, higher 2008 franchisee incentives of $1.3 million and higher 2008 convention costs of $0.6 million. Excluding these expenses, EBITDA from continuing operations were approximately flat from a year ago.
Commenting on the quarter, Chief Executive Officer and President Kerrii Anderson said, "We are not satisfied with first-quarter results. We know we must do better and we are focused on driving sales and performance in future quarters. We recently launched several high-quality products and introduced compelling, new advertising, as we continue to execute many elements of our strategic plan.
"After a very challenging January, same-store sales were better in February and March. April same-store sales, which benefit from the Easter holiday shift, are running positive month to date," said Anderson. "We continue to highlight Wendy's(R) quality value offerings, as our consumers feel the pressures of a weakened economy, record-high gasoline prices and soaring food costs." Due to the uncertainties resulting from the economy, commodities and the Board's Special Committee process, the Company does not plan to provide detailed earnings guidance for 2008 and beyond.
2008 1st Quarter Financial Highlights - U.S. company-operated restaurant EBITDA margins were 8.1% in the first
quarter of 2008, compared to 9.2% in the first quarter of 2007. The
year-over-year difference is due primarily to higher breakfast costs,
lower-than-expected sales and higher commodity costs, partially offset
by labor efficiency and menu price increases. - Total company-operated restaurant EBITDA margins were 7.6% in the first
quarter of 2008, compared to 8.6% one year ago. - As previously announced, first-quarter same-store sales at U.S. franchise-operated restaurants decreased 0.1%, compared to an increase
of 3.7% in the first quarter of 2007. First-quarter same-store sales
at U.S. company-operated restaurants decreased 1.6%, compared to an
increase of 3.8% in the first quarter of 2007. Sales trends improved in
February and March compared to January, as sales rolled over the
strongest quarter of the previous year. - The Company faced a calendar shift in 2008 with the Easter holiday
falling in the first quarter (March 21-23), as opposed to the second
quarter a year ago. This negatively impacted same-store sales at
company restaurants by an estimated 0.3% during the quarter. First-
quarter sales also were impacted by the severe winter weather in March
in the Midwest and North. - The total number of system-wide Wendy's restaurants as of March 30,
2008, was 6,622, compared to 6,658 as of the end of the same quarter a
year ago.
Company focused on quality, innovation and operations excellence
The Company recently introduced its high-quality Chicken Go Wrap, featuring center-cut, chicken breast fillets - available Grilled, Spicy or Homestyle. In addition, Wendy's is offering for a limited-time its popular Southwest Chicken Caesar Salad.
"New product introductions such as our Chicken Go Wrap are expected to drive customer traffic and strengthen our focus on quality," Anderson said.
"Our enhanced strategic plan - 'Doing What's Right for Our Customers' - leverages our strong history of quality and innovation and focuses on attracting new and important customer segments with value, beverage, snack and core sandwich strategies," said Anderson.
The Company previously announced that Steve Farrar has returned to Wendy's as Chief of North America Operations, a new position in the Company. Reporting directly to Chief Operations Officer Dave Near, Farrar will be responsible for improving restaurant operations at company and franchise stores in all three U.S. regions and Canada, while growing sales and driving profit margins. Farrar also will serve on Wendy's strategic planning council.
The Company's search for a permanent Chief Marketing Officer is ongoing. In February, Paul Kershisnik was named interim Chief Marketing Officer and is a candidate for the position. Kershisnik, who joined Wendy's in March 2007 as Senior Vice President of Marketing Strategy and Innovation, has responsibility for research and development, strategic insights, operations innovation, brand marketing, field marketing, media, diversity marketing and creative/advertising production.
Board approves 121st consecutive quarterly dividend The Board of Directors approved a quarterly dividend of 12.5 cents per share, payable May 19, 2008 to shareholders of record as of May 5, 2008. The dividend payment will represent the Company's 121st consecutive quarterly dividend.
Company will not hold its 2008 first-quarter conference call The previously announced first quarter conference call and webcast which was scheduled for Friday, April 25 has been cancelled as a result of today's joint announcement by Wendy's and Triarc Companies.
Safe Harbor statement Certain information in this news release, particularly information regarding future economic performance and finances, and plans, expectations and objectives of management, is forward looking. Factors set forth in our Safe Harbor under the Private Securities Litigation Reform Act of 1995, in addition to other possible factors not listed, could affect the Company's actual results and cause such results to differ materially from those expressed in forward-looking statements.
Please review the Company's Safe Harbor statement at http://www.wendys-invest.com/safeharbor.
Wendy's International, Inc. overview Wendy's International, Inc. is one of the world's largest and most successful restaurant operating and franchising companies. More information about the Company is available at http://www.wendys-invest.com/.
Appendix 1st Quarter Financial and Income Statement Information
The Company's first-quarter 2008 reported results from continuing operations include the impact of: - Cost of sales - $319.8 million, or 62.3% of retail sales, in the first
quarter of 2008, compared to $324.1 million, or 62.0% of retail sales,
in the first quarter of 2007. The year-over-year difference is due
primarily to a decline in sales, breakfast sales at lower margins and
increased commodity costs, partially offset by labor efficiency and
menu price increases. - Company restaurant operating costs - $151.2 million, or 29.5% of sales,
in the first quarter of 2008, compared to $152.4 million, or 29.1% of
sales, in the first quarter of 2007. The year-over-year difference as
a percent of sales is due to lower sales. - Operating costs - $6.8 million in the first quarter of 2008, compared
to $3.9 million in the first quarter of 2007. The year-over-year
increase is due primarily to incremental franchisee incentives of $1.3
million during the quarter and breakfast advertising costs to support
franchisees of $1.0 million during the quarter. Spending to support
franchisee breakfast advertising began in the second half of 2007. - General and administrative expense - $53.2 million, or 9.1% of revenue,
in the first quarter of 2008, compared to $50.8 million, or 8.6% of
revenue, in the first quarter of 2007. The year-over-year difference
includes higher professional and legal fees of $1.8 million, higher
salaries and benefits of $1.2 million, 2008 convention expenses of $0.6
million as well as other higher expenses. Also, 2008 includes lower
bonus accruals of $3.8 million. - Restructuring costs - $0.2 million in the first quarter of 2008. This
compares to $1.0 million in restructuring costs in the first quarter of
2007. - Special Committee related charges - $6.7 million in the first quarter
of 2008 in expenses related to the Board's Special Committee. Wendy's
Chairman Jim Pickett announced the formation of the Special Committee
on April 26, 2007. The Company did not incur any Special Committee
expense in the first quarter of 2007. - Other income/expense - $1.5 million of expense in the first quarter of
2008, compared to $1.3 million of expense in the first quarter of 2007,
including lower 2008 gains on asset dispositions of $0.5 million and
lower 2008 store closure charges of $0.5 million. - Interest - Interest expense of $9.1 million in the first quarter of
2008, compared to $12.2 million a year ago. The year-over-year
decrease reflects the pay down of the debt associated with the sale of
approximately 40% of the 2007 U.S. royalty stream. Interest income of
$2.1 million in the first quarter of 2008, compared to $5.4 million a
year ago, reflects lower cash balances as well as a decrease in
interest rates. - Taxes - The Company's first-quarter tax rate was a higher-than-expected
40.5%. This compares to 33.5% in the first quarter of 2007 which
benefited from non recurring refund claims. - Shares outstanding - A lower share count of 88.3 million average
diluted shares in the first quarter of 2008, compared to 95.7 million
average diluted shares in the first quarter of 2007. The Company
repurchased 9.0 million shares in an accelerated share repurchase in
the first quarter of 2007.
First-Quarter Average Same-Store Sales Summary 1Q 2008 1Q 2007 U.S. Company -1.6% 3.8%
U.S. Franchise -0.1% 3.7% Monthly Average Same-Store Sales Summary for January, February and March Jan 2008 Jan 2007 Feb 2008 Feb 2007 Mar 2008 Mar 2007 U.S. Company -3.8% 4.8% 0.4% 3.3% -0.8% 3.6%
U.S. Franchise -2.1% 4.7% 2.3% 2.7% 0.1% 3.7%
Discontinued operations
During the third quarter of 2007, the Company completed the sale of Cafe Express. Accordingly, the after-tax operating results of Cafe Express appear in the "Discontinued Operations" line on the income statement.
Disclosure regarding non-GAAP financial measures The Company uses adjusted income and adjusted EPS from continuing operations as internal measures of operating performance. Management believes adjusted income and adjusted EPS from continuing operations provide a meaningful perspective of the underlying operating performance of the business. EBITDA is used by management as a performance measure for benchmarking against its peers and competitors. The Company believes EBITDA is useful to investors because it is frequently used by securities analysts, investors and other interested parties to evaluate companies in the restaurant industry. EBITDA is not a recognized term under GAAP.
The Company also uses adjusted EBITDA, which accounts for certain items unrelated to ongoing operations, as an internal measure of business operating performance. Management believes adjusted EBITDA provides a meaningful perspective of the underlying operating performance of the business.
Company EBITDA margins from continuing operations consist of operating income plus depreciation and amortization divided by revenue.
Company-operated restaurant EBITDA margins consist of sales from company- operated restaurants minus cost of sales from company-operated restaurants minus company restaurant operating costs divided by sales from company- operated restaurants.
EBITDA and Adjusted EBITDA Reconciliations The following are reconciliations of 2008 and 2007 first-quarter reported operating income to first-quarter EBITDA from continuing operations and adjusted EBITDA: 1st Quarter 1st Quarter
2008 2007
---- ----
Reported operating income $ 13.9 million $ 28.6 million
Depreciation and amortization $ 28.9 million $ 28.4 million
----------------------------- ---------------- ---------------
EBITDA from continuing ops $ 42.8 million $ 57.0 million
Restructuring charges $ 0.2 million $ 1.0 million
Special Committee expenses $ 6.7 million --
----------------------------- ---------------- ---------------
Adjusted EBITDA from
continuing ops $ 49.7 million $ 58.0 million
================ ===============
Income and EPS Reconciliations
The following are reconciliations of 2008 and 2007 first-quarter income from continuing operations to first-quarter adjusted income from continuing operations: 1st Quarter 1st Quarter
2008 2007
---- ----
Income from continuing operations $ 4.1 million $ 14.5 million
Restructuring charges, net of
tax (1) $ 0.1 million $ 0.6 million
Special Committee expenses, net
of tax (1) $ 4.2 million --
--------------------------------- ---------------- ---------------
Adjusted income from
continuing ops $ 8.4 million $ 15.1 million
================================= ================ ===============
Diluted shares 88.3 million 95.7 million
Adjusted diluted EPS from
continuing ops $ 0.10 $ 0.16 (1) After tax amounts are computed using a tax rate of 38%. WENDY'S INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data) (Unaudited) First Quarter Ended
03/30/2008 04/01/2007 $ Change % Change
--------- --------- -------- -------
REVENUES
Sales $513,017 $522,944 ($9,927) -1.9%
Franchise revenues 69,174 67,220 1,954 2.9%
--------- --------- --------- -------
TOTAL REVENUES 582,191 590,164 (7,973) -1.4%
--------- --------- --------- -------
COSTS & EXPENSES
Cost of sales 319,830 324,061 (4,231) -1.3%
Company restaurant operating
costs 151,244 152,388 (1,144) -0.8%
Operating costs 6,844 3,935 2,909 73.9%
Depreciation of property &
equipment 28,806 28,052 754 2.7%
General & administrative expenses 53,236 50,822 2,414 4.7%
Restructuring and special
committee related charges 6,863 1,031 5,832 565.7%
Other expense (income), net 1,454 1,318 136 10.3%
--------- --------- --------- -------
TOTAL COSTS & EXPENSES 568,277 561,607 6,670 1.2%
--------- --------- --------- -------
OPERATING INCOME 13,914 28,557 (14,643) -51.3% Interest expense (9,107) (12,207) 3,100 25.4%
Interest income 2,154 5,416 (3,262) -60.2%
--------- --------- --------- -------
INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES 6,961 21,766 (14,805) -68.0% INCOME TAXES 2,818 7,285 (4,467) -61.3%
--------- --------- --------- -------
INCOME from continuing operations $4,143 $14,481 ($10,338) -71.4% INCOME from discontinued
operations $0 $206 (206) -100.0%
--------- --------- --------- ------- NET INCOME $4,143 $14,687 ($10,544) -71.8%
========= ========= ========= =======
Diluted earnings per common share
from continuing operations $0.05 $0.15 ($0.10) -68.7%
========= ========= ========= =======
Diluted earnings per common share
from discontinued operations $0.00 $0.00 $0.00 0.0%
========= ========= ========= =======
Total diluted earnings per common
share $0.05 $0.15 ($0.10) -68.7%
========= ========= ========= =======
Diluted shares 88,284 95,706 (7,422) -7.8%
========= ========= ========= ======= WENDY'S INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS March 30, December 30,
2008 2007
---------- ----------
(Unaudited)
(Dollars in thousands) ASSETS Current assets
Cash and cash equivalents $207,562 $211,200
Accounts receivable, net 62,525 72,069
Deferred income taxes 6,701 7,304
Inventories and other 27,123 29,590
Advertising fund restricted assets 41,251 42,665
Assets held for disposition 4,031 3,338
---------- ----------
349,193 366,166
---------- ---------- Property and equipment 2,120,661 2,119,140
Accumulated depreciation (886,088) (872,255)
---------- ----------
1,234,573 1,246,885
---------- ---------- Goodwill 84,479 84,001 Deferred income taxes 4,788 4,899 Intangible assets, net 2,616 2,704 Other assets 83,299 84,742
---------- ----------
$1,758,948 $1,789,397
========== ========== WENDY'S INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS March 30, December 30,
2008 2007
---------- ----------
(Unaudited)
(Dollars in thousands) LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities
Accounts payable $75,407 $85,662
Accrued expenses:
Salaries and wages 24,972 39,157
Taxes 30,758 31,033
Insurance 60,037 57,190
Other 67,032 45,612
Advertising fund restricted
liabilities 40,559 35,760
Current portion of long-term
obligations 1,687 26,591
---------- ----------
300,452 321,005
---------- ----------
Long-term obligations
Term debt 521,385 521,343
Capital leases 21,830 21,680
---------- ----------
543,215 543,023
---------- ---------- Deferred income taxes 43,047 45,351
Other long-term liabilities 75,702 75,887
Commitments and contingencies Shareholders' equity
Preferred stock, Authorized:
250,000 shares
Common stock, $.10 stated value per
share, Authorized: 200,000,000 shares,
Issued: 130,259,000 and
130,241,000 shares, respectively 13,026 13,024
Capital in excess of stated value 1,114,095 1,110,363
Retained earnings 1,281,081 1,287,963
Accumulated other comprehensive
income (expense):
Cumulative translation adjustments
and other 24,063 28,949
Pension liability (18,555) (18,990)
---------- ----------
2,413,710 2,421,309
Treasury stock, at cost:
42,844,000 and 42,844,000 shares,
respectively (1,617,178) (1,617,178)
---------- ----------
796,532 804,131
---------- ----------
$1,758,948 $1,789,397
========== ========== WENDY'S INTERNATIONAL, INC. AND SUBSIDIARIES
SYSTEMWIDE RESTAURANTS Increase/ Increase/
As of As of (Decrease) As of (Decrease)
March 30, December 30, From Prior April 1, From Prior
2008 2007 Quarter 2007 Year
-------------------------------------------------------
Wendy's
U.S. Company 1,267 1,274 (7) 1,308 (41)
Franchise 4,650 4,662 (12) 4,641 9
-------------------------------------------------------
5,917 5,936 (19) 5,949 (32)
Canada
Company 140 140 0 145 (5)
Franchise 237 236 1 231 6
-------------------------------------------------------
377 376 1 376 1
Other International
Company 0 0 0 2 (2)
Franchise 328 333 (5) 331 (3)
-------------------------------------------------------
328 333 (5) 333 (5) Total Wendy's
Company 1,407 1,414 (7) 1,455 (48)
Franchise 5,215 5,231 (16) 5,203 12
-------------------------------------------------------
6,622 6,645 (23) 6,658 (36)
======================================================= WENDY'S INTERNATIONAL, INC. Income Statement Definitions Sales Includes sales from company operated
restaurants. Also included are sales of
kids' meal toys and the sales to franchisees
from Wendy's bun baking facilities.
Franchise Revenues Consists primarily of royalties, rental
income, gains from the sales of properties to
franchisees and franchise fees. Franchise
fees include charges for various costs and
expenses related to establishing a
franchisee's business.
Cost of Sales Includes food, paper and labor costs for
restaurants. Also included are the cost of
kids' meal toys and cost of goods sold to
franchisees from Wendy's bun baking
facilities.
Company Restaurant Consists of all costs necessary to manage and
Operating Costs operate restaurants, except cost of sales and
depreciation. These include advertising,
insurance, maintenance, rent, etc., as well
as support costs for personnel directly
related to restaurant operations.
Operating Costs Includes rent expense related to properties
leased to franchisees and other franchisee
related costs such as remodel incentives. Also includes costs to operate and maintain
Wendy's bun baking facilities.
General and Administrative Costs that cannot be directly related to
Expenses generating revenue.
Restructuring and Special Includes restructuring costs and costs
Committee Related Charges related to the Special Committee of the Board
of Directors, which was formed to explore
strategic alternatives for the Company.
Other Income and Expense Includes expenses (income) that are not
directly derived from the Company's primary
businesses. This includes income from the
Company's investments in joint ventures and
other minority investments. Expenses include
store closures, other asset write-offs, and
sales of properties to non-franchisees.
Income from Discontinued Reflects net income from Cafe Express. Operations
http://www.newscom.com/cgi-bin/prnh/20080104/CLF020LOGO DATASOURCE: Wendy's International, Inc.
CONTACT: INVESTORS: John Barker, +1-614-764-3044, , Marsha Gordon +1-614-764-3019, , or Kim Messner +1-614-764-6796 or ; MEDIA: Denny Lynch, +1-614-764-3553, , or Bob Bertini, +1-614-764-3327, Web site: http://www.wendys-invest.com/
|