The Wendy’s Company has reported results for the second quarter ended July 3, 2011. The Company completed the sale of Arby’s Restaurant Group, Inc. on July 4, 2011 and Arby’s results are reflected as discontinued operations for all periods presented.
Roland Smith, President and Chief Executive Officer of The Wendy’s Company said, “We were pleased to produce a 2.3% same-store sales increase at Wendy’s North America Company-operated restaurants in the second quarter of 2011, which represents the brand’s best sales performance since the fourth quarter of 2008. Importantly, we generated positive transactions during the quarter, which we believe reflect the cumulative benefit of our ‘Real’ brand positioning and significant core menu improvements. EBITDA for the second quarter met our expectations, and consequently we are re-affirming our 2011 adjusted EBITDA1 outlook of $330 million to $340 million. We anticipate strong same-store sales in the third and fourth quarters driven by innovative products and the launch of our new cheeseburger line.
“Having completed the sale of Arby’s, our sole focus will be on Wendy’s and delivering 10% to 15% average annual EBITDA growth in 2012 and beyond. This growth will be driven by successfully executing our key strategies, including continuing to improve our core menu, capturing incremental sales through day part expansion, upgrading our existing store base, and developing new restaurants within the United States and targeted international markets to expand the brand worldwide. We view investing in these areas as a great use of our capital and are confident that they will enable us to enhance value for our shareholders,” said Smith.
Consolidated Second Quarter 2011 Summary
- Consolidated revenues were $622.5 million in the second quarter of 2011, and increased $15.1 million as compared to second quarter 2010 revenues of $607.4 million.
- Second quarter 2011 adjusted EBITDA, excluding special items totaling $11.8 million, was $89.4 million, and decreased $10.0 million as compared to second quarter 2010 adjusted EBITDA of $99.4 million, excluding special items of $8.6 million.
- Second quarter 2011 net income from continuing operations was $11.4 million, or $0.03 per share, including net after-tax special items of $7.6 million, or $0.02 per share. Second quarter 2010 net income from continuing operations was $5.4 million, or $0.02 per share, including after-tax special items of $18.8 million, or $0.04 per share.
Consolidated Year-to-Date 2011 Summary
- Consolidated revenues were $1.2 billion and were unchanged as compared to 2010 year-to-date revenues.
- Adjusted EBITDA, excluding special items of $19.3 million, was $163.1 million, as compared to 2010 year-to-date adjusted EBITDA of $186.9 million, excluding special items of $26.0 million.
- Net income from continuing operations was $11.1 million, or $0.03 per share, including net after-tax special items of $17.2 million, or $0.04 per share, as compared to 2010 year-to-date net income from continuing operations of $12.8 million, or $0.03 per share, including after-tax special items of $29.6 million, or $0.07 per share.
Wendy’s Second Quarter 2011 Brand Summary
- Wendy’s North America systemwide same-store sales increased 2.3%, including a 2.3% increase in North America Company-operated restaurants due to increased average check of +1.4% and increased transactions of +0.9%.
- Wendy’s North America franchise same-store sales increased 2.3%.
- Wendy’s Company-operated restaurant margin was 13.9%, compared to 16.4% in the second quarter 2010, a decrease of approximately 250 basis points. The year-over-year difference was primarily due to higher commodity costs (180 basis points) and incremental advertising to support the introduction of Wendy’s new breakfast in additional markets (60 basis points).
“We are preparing for the national launch of our exciting new cheeseburger line, ‘Dave’s Hot ‘N Juicy’, in October. We believe this new cheeseburger line will allow us to build upon our quality leadership position within the hamburger segment and continue to grow sales. In addition, we are encouraged by customer acceptance of our new breakfast, and we are continuing the rollout of our new menu as we make progress on our goal of serving the new breakfast menu in approximately 1,000 restaurants by year-end,” said Smith.
Wendy’s expanded into Russia during the second quarter 2011, opening two restaurants. These openings are part of the development agreement announced in August of 2010 with franchisee Wenrus Restaurant Group Limited, which includes the development of 180 restaurants in the Russian Federation over the next 10 years.
The Company currently has 333 franchise restaurants outside of North America and more than 700 future restaurant commitments, totaling over 1,000 restaurants. The Company is also actively pursuing opportunities in China, Brazil and other markets around the world.
The Company has reaffirmed its 2011 expectations for adjusted EBITDA of $330 million to $340 million. This outlook only includes continuing operations and excludes items such as Arby’s indirect corporate overhead, retention program and other transaction related costs, and SSG purchasing cooperative expenses.
The Company’s 2011 outlook includes the following expectations:
- Same-store sales growth of 1% to 3% at Wendy’s North America Company-operated restaurants.
- Wendy’s Company-operated restaurant margin is now anticipated to be 50 to 100 basis points lower as compared to prior year, primarily due to higher commodity costs.
- Capital expenditures for the Wendy’s brand of approximately $145 million.
- Wendy’s North America unit development of approximately 20 company stores and 45 franchise stores, plus approximately 40 international franchise stores.
Sale of Arby’s and Transition Process
The Company completed the sale of Arby’s Restaurant Group, Inc. on the terms previously announced to a buyer formed by Roark Capital Group on July 4, 2011. Under a transition services agreement with Arby’s, the Company will provide and be reimbursed for support services for 90 days, with 30-day extension options through the end of the year.
The Company plans to relocate its corporate headquarters to Dublin, Ohio. The current Atlanta corporate office will continue to provide support services and will be the headquarters for international operations.
Year-to-date through August 5, 2011, the Company has repurchased approximately 24 million shares of common stock for $122 million at an average price of $5.18 per share. As of August 5, 2011, $128 million remains authorized by the Board of Directors and is available for the repurchase of additional common stock.
Since the Board of Directors authorized a stock repurchase program in 2009, the Company has repurchased approximately 76 million shares of common stock for $367 million as of August 5, 2011, at an average price of $4.84 per share.
The common stock repurchase program allows the Company to make repurchases as market conditions warrant and to the extent legally permissible.
Second Quarter 2011 Special Expense Charges
For the second quarter 2011, the Company recorded net after-tax special charges of $7.6 million, including Arby’s indirect corporate overhead, retention program and other transaction related costs and impairment of long-lived assets.
The Wendy’s Company is the third largest quick-service hamburger company in the United States. The Wendy’s system includes more than 6,500 franchise and Company restaurants in the U.S. and 25 other countries and U.S. territories worldwide.