|Wendy's/Arby's Group, Inc. Reports 1st Quarter 2009 Results|
Roland Smith, President and Chief Executive Officer of Wendy's/Arby's Group, said: "We are pleased with the progress we made at both brands during the quarter, including positive same-store sales and margin improvement at Wendy's as well as improved same-store sales results in March at Arby's. Our adjusted EBITDA of $80.3 million met our expectations for the quarter and we remain on track with our target of $100 million in restaurant margin improvement at the Wendy's brand and $60 million in general and administrative (G&A) cost savings by the end of 2011. As the economy rebounds, our stockholders should benefit from the significant operating leverage our brands can generate as we grow sales and control costs."
Wendy's Brand Highlights
For the first quarter, Wendy's sales were $507.0 million from company-operated restaurants and other sales and franchise revenues were $71.2 million.
Wendy's ended the quarter with 6,623 restaurants, a net increase of one unit from the end of the first quarter of 2008.
Smith added: "We are encouraged that Wendy's North America company-operated same-store sales, excluding the impact of breakfast, were up approximately 1.6% and franchise same-store sales were also positive as we promoted our 'Value Trio' of 99 cents sandwiches and our Premium Fish during the quarter. We achieved positive sales despite heavy discounting and couponing at most quick-service restaurant brands. We continued to make excellent progress on margins as we effectively managed labor and controllable costs. In addition, we are just now beginning to leverage the disciplined R&D and market testing work initiated by our new leadership team last fall. We will begin introducing new products over the next several months, including new premium hamburger, chicken and Frosty(TM) offerings, with advertising designed to enhance Wendy's quality brand positioning."
Click here for photos and advertising of Wendy's Coffee Toffee Twisted Frosty and Frosty-cino: www.wendysarbys.com/about/our-brands/wendysrestaurant.
Arby's Brand Highlights
For the first quarter, Arby's sales decreased to $266.2 million for company-operated restaurants and franchise revenues decreased to $19.5 million.
Arby's ended the first quarter of 2009 with 3,741 restaurants, a net increase of 47 units from the end of the first quarter of 2008.
"The new Roastburger line got off to a good start during the quarter with national advertising and a comprehensive public relations launch generating positive attention for the Arby's brand," said Smith. "The sandwiches, which appeal to our core roast beef customers, have been very well received generating meaningful sales improvement and mid-teens product mix in March. We also effectively managed our controllables and food costs during the quarter. This enabled Arby's to produce restaurant margins in line with our expectations, despite the deleveraging effect of negative same-store sales. While recent sales trends at Arby's have softened from the initial Roastburger launch in March, we have retained much of the sales improvement from the Roastburger introduction and have begun to promote Roastburgers again in May."
Click here for photos and advertising of Arby's Roastburger line and new Roasted Chicken sandwich: www.wendysarbys.com/about/our-brands/arbysrestaurant.
Key Profit Initiatives on Track and Company Re-affirms Financial Outlook
The Company's key profit initiatives targeting a total of $160 million in annualized incremental EBITDA by the end of 2011 remain on track. These targeted improvements include $60 million from achieving synergies and overhead reductions, and $100 million from improving margins at Wendy's company-operated restaurants by 500 basis points. The Company continues to expect to achieve average annual EBITDA growth in the mid-teens through 2011.
Special Expense Items
For the first quarter of 2009, the Company recorded net pre-tax special expense items of approximately $26 million ($15 million after-tax), including integration-related expenses, impairment, depreciation adjustments, asset write-offs and investment losses.
Amended Credit Agreement Completed
During the first quarter, the Company completed an amendment of Arby's senior secured credit facility which added Wendy's as a co-borrower. The amended credit agreement includes a senior secured term loan, due in July 2012, of which $384 million was outstanding as of March 29, 2009, and a $170 million senior secured revolving credit facility, of which no amounts were outstanding, which expires in July 2011. Availability under the revolver was $120.5 million which is net of outstanding letters of credit.
This amended credit facility utilizes the combined financial results of Arby's and Wendy's and their more moderately leveraged combined balance sheet to provide significant financial flexibility to support the Company's key strategic initiatives. As of March 29, 2009, the Company's long-term debt to total capital ratio was approximately 31%.
Management to Host Conference Call Today - May 7, 2009
Management will host a conference call to discuss its financial results today (May 7) at 11:00 a.m. ET. The call will also be webcast live from the investor relations page of the Company's website, at www.wendysarbys.com. Hosting the call will be Roland Smith, President and Chief Executive Officer; Stephen Hare, Senior Vice President and Chief Financial Officer; and John Barker, Senior Vice President and Chief Communications Officer. The conference call can be accessed live over the phone by dialing 888-549-7750 or for international callers by dialing 480-629-9866. A replay will be available one hour after the call and can be accessed by dialing 800-406-7325 or for international callers by dialing 303-590-3030; the passcode for the replay is 4065554#. The replay will be available until Thursday, May 21, 2009. The webcast will also be archived on the Company's website at www.wendysarbys.com.
About Wendy's/Arby's Group, Inc.
Wendy's/Arby's Group, Inc is the third largest quick-service restaurant company in the U.S. and includes Wendy's International, Inc., the franchisor of the Wendy's restaurant system, and Arby's Restaurant Group, Inc., the franchisor of the Arby's restaurant system. The combined restaurant systems include more than 10,000 restaurants in the United States and 24 countries and territories worldwide. To learn more about Wendy's/Arby's Group, please visit the Company's web site at www.wendysarbys.com.
This press release contains certain statements that are not historical facts, including, importantly, information concerning possible or assumed future results of operations of Wendy's/Arby's Group, Inc. and its subsidiaries (collectively Wendy's/Arby's Group or the Company). Those statements, as well as statements preceded by, followed by, or that include the words "may," "believes," "plans," "expects," "anticipates," or the negation thereof, or similar expressions, constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 (the Reform Act). All statements that address future operating, financial or business performance; strategies or expectations; future synergies, efficiencies or overhead savings; anticipated costs or charges; future capitalization; future domestic or international business development; future daypart expansion; and anticipated financial impacts of recent or pending transactions are forward-looking statements within the meaning of the Reform Act. The forward-looking statements are based on our expectations at the time such statements are made, speak only as of the dates they are made and are susceptible to a number of risks, uncertainties and other factors. Our actual results, performance and achievements may differ materially from any future results, performance or achievements expressed or implied by our forward-looking statements. For all of our forward-looking statements, we claim the protection of the safe harbor for forward-looking statements contained in the Reform Act. Many important factors could affect our future results and could cause those results to differ materially from those expressed in, or implied by our forward-looking statements. Such factors, all of which are difficult or impossible to predict accurately, and many of which are beyond our control, include, but are not limited to: (1) changes in the quick service restaurant industry, such as consumer trends toward value-oriented products and promotions or toward consuming fewer meals away from home; (2) prevailing economic, market and business conditions affecting the Company, including competition from other food service providers, increasing unemployment and decreasing consumer spending; (3) the ability to successfully integrate acquired businesses and to achieve related synergies, cost reductions and operational improvements; (4) cost and availability of capital; (5) increasing costs associated with food, supplies, energy, fuel, distribution or labor; (6) the financial condition of our franchisees; (7) conditions beyond the Company's control such as weather, natural disasters, disease outbreaks, epidemics or pandemics impacting the Company's customers or food supplies, or acts of war or terrorism; (8) the availability of suitable locations and terms for the development of new restaurants; (9) adoption of new, or changes in, laws, regulations or accounting policies and practices; (10) changes in debt, equity and securities markets; (11) changes in the interest rate environment; and (12) other factors discussed from time to time in the Company's news releases, public statements and/or filings with the SEC, including those identified in the "Risk Factors" sections of our Annual and Quarterly Reports on Forms 10-K and 10-Q.
All future written and oral forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to above. New risks and uncertainties arise from time to time, and it is impossible for us to predict these events or how they may affect us. We assume no obligation to update any forward-looking statements as a result of new information, future events or developments, except as required by federal securities laws. In addition, it is our policy generally not to make any specific projections as to future earnings, and we do not endorse any projections regarding future performance that may be made by third parties.
Disclosure Regarding Non-GAAP Financial Measures
Earnings before interest, taxes, depreciation and amortization (EBITDA) is used by the Company as a performance measure for benchmarking against the Company's 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. The Company also uses adjusted EBITDA, which excludes integration costs included within general and administrative expense and facilities relocation and corporate restructuring, as an internal measure of business operating performance. The Company believes adjusted EBITDA provides a meaningful perspective of the underlying operating performance of the Company's current business. EBITDA and adjusted EBITDA are not recognized terms under U.S. Generally Accepted Accounting Principles (GAAP). Because all companies do not calculate EBITDA or similarly titled financial measures in the same way, those measures as used by other companies may not be consistent with the way the Company calculates EBITDA or similarly titled financial measures and should not be considered as alternative measures of operating profit or net income (loss).
The Company's presentation of EBITDA and adjusted EBITDA is not intended to replace the presentation of the Company's financial results in accordance with GAAP.
1 The 2009 results include the effect of the merger between Triarc Companies, Inc. and Wendy's International, Inc., which was completed on September 29, 2008; however, the three months ended March 30, 2008 only include results for Triarc Companies, Inc. In connection with the merger, Wendy's became a wholly owned subsidiary of Triarc and Triarc changed its name to Wendy's/Arby's Group, Inc. and converted each outstanding share of Triarc's Class B common stock into one share of Wendy's/Arby's Class A common stock.
2 Excludes cash and cash equivalents related to trust accounts for termination costs for former Wendy's executives, restricted cash and cash equivalents in a managed account, and other investments.
(a) The calculation of EBITDA and Adjusted EBITDA and a reconciliation of EBITDA to net loss follow.
*The Wendy's results for the three months ended March 30, 2008 reflect adjustments to the franchise revenues and restaurant margin to conform to Wendy's/Arby's Group definitions. Restaurant margin is defined as sales from Company-owned restaurants (excluding sales from bakery items and kid's meal promotion items to franchisees) less cost of sales (excluding costs from bakery items and kid's meal promotion items), divided by sales.
SOURCE: Wendy's/Arby's Group, Inc.