DUBLIN, Ohio - May 11, 2016 // PRNewswire // - The Wendy's Company (NASDAQ: WEN) today reported unaudited results for the first quarter ended April 3, 2016.
President and Chief Financial Officer Todd Penegor said that the Company's first-quarter results exceeded its expectations. "Our strong first-quarter demonstrates the continued momentum of our core business, as well as the positive impact of our system optimization and Image Activation growth initiatives," Penegor said. "Our two-year North America system comparable sales performance of 6.8 percent is our strongest in more than a decade, and due to our first-quarter outperformance relative to our annual operating plan, we are increasing our 2016 outlook for both Adjusted Earnings per Share and Adjusted EBITDA.
"As we look to the second quarter, the performance of our '4 for $4' promotion remains solid with the addition of our Crispy Chicken BLT to the offering," Penegor said. "We are committed to our High-Low marketing strategy and driving growth in the premium component of our business to complement the growth we have seen in the value segment. We remain confident in our full-year same-restaurant sales outlook of approximately 3 percent for the North America system and expect to generate second-quarter same-restaurant sales growth somewhat below our full year target."
A summary of the Company's first-quarter results is below. See "Disclosure Regarding Non-GAAP Financial Measures" for a reconciliation of the non-GAAP measures included herein, i.e., Adjusted EBITDA, Adjusted EBITDA margin and Adjusted Earnings per Share. Due to the May 2015 sale of its bakery business, the Company has presented its bakery results as discontinued operations for all periods presented in its consolidated financial statements.
First-quarter 2016 summary
As previously announced, Chief Executive Officer Emil Brolick intends to retire from management duties with the Company at the time of the Company's Annual Meeting of Stockholders on May 26, 2016. Brolick will be succeeded as CEO by current President and Chief Financial Officer Todd Penegor. Penegor will transition his duties as CFO to Gunther Plosch during the month of May, and Penegor will retain his position as President upon his appointment as CEO. The Company expects that Brolick will continue to serve on the Company's Board of Directors following his retirement to ensure continuity of leadership and strategic focus for the Company.
The Company remains on track with its plan to reduce its Company-operated restaurant ownership to approximately 5 percent of the total system. As part of this plan, the Company intends to sell a total of approximately 315 restaurants to franchisees during 2016, including 55 restaurants that were sold in the first quarter. The planned sale of these restaurants follows the sale of 826 restaurants in 2013, 2014 and 2015 as part of the Company's system optimization initiative.
"We believe our system optimization initiative will drive future growth by providing opportunities for expanded restaurant ownership to strong operators who have demonstrated a commitment to Image Activation and opening new restaurants," Penegor said. "Interest in the markets that we intend to sell during 2016 remains high from franchisees, and we are confident we will strengthen the Wendy's® brand as a result of these transactions.
"Going forward, we intend to buy and sell restaurants to act as a catalyst for growth by further strengthening our franchisee base, driving new restaurant development and accelerating Image Activation adoption," Penegor said. "We are also helping to facilitate franchisee-to-franchisee restaurant transfers to ensure that we are putting restaurants in the hands of well capitalized franchisees that are committed to long-term growth."
The Company and its franchisees plan to reimage 430 total North America system restaurants and build 110 new North America restaurants in 2016. This is in addition to the 519 total North America system reimages and new restaurants built during 2015.
"Our pipeline for restaurant reimaging and new restaurant development remains strong," Penegor said. "The North America system opened 25 new restaurants during the first-quarter and we expect to deliver the first year of net new restaurant openings since 2010. With more than 24 percent of the North America system now featuring our new image, we are on pace to achieve our goal of reimaging at least 60 percent of ourNorth America restaurants by the end of 2020."
The Company today announced the declaration of its regular quarterly cash dividend of $0.06 per share, payable on June 15, 2016, to shareholders of record as of June 1, 2016. The approximate number of common shares outstanding as of May 5, 2016 was 266.5 million.
Company repurchases 4.9 million shares for $48.2 million in first quarter
The Company repurchased 4.9 million shares for $48.2 million in the first quarter at an average price of $9.87 per share. This is in addition to the more than $1 billion in share repurchases the Company executed during 2015. The Company has approximately $308 million remaining on its existing share repurchase authorization, which expires at the end of 2016.
The Company is increasing its outlook for 2016 Adjusted Earnings per Share to $0.38 to $0.40 from its prior guidance of $0.35 to $0.37 and increasing its outlook for 2016 Adjusted EBITDA to down 1 percent to up 1 percent compared to 2015 from its prior guidance of down 2 percent to flat.
The Company now expects:
In addition, the Company continues to expect:
The Company's 2016 outlook includes the impact of:
The Company continues to expect to achieve the following North America system goals by the end of 2020:
Update on investigation into unusual credit card activity
As previously reported, the Company engaged cybersecurity experts earlier this year to conduct a comprehensive investigation into unusual credit card activity at some Wendy's restaurants. Investigation into this activity is nearing completion. Based on the preliminary findings of the investigation and other information, the Company believes that malware, installed through the use of compromised third-party vendor credentials, affected one particular point of sale system at fewer than 300 of approximately 5,500 franchised North America Wendy's restaurants, starting in the fall of 2015. These findings also indicate that the Aloha point of sale system has not been impacted by this activity. The Aloha system is already installed at all Company-operated restaurants and in a majority of franchise-operated restaurants, with implementation throughout the North America system targeted by year-end 2016. The Company expects that it will receive a final report from its investigator in the near future.
The Company has worked aggressively with its investigator to identify the source of the malware and quantify the extent of the malicious cyber-attacks, and has disabled and eradicated the malware in affected restaurants. The Company continues to work through a defined process with the payment card brands, its investigator and federal law enforcement authorities to complete the investigation.
Based upon the investigation to date, approximately 50 franchise restaurants are suspected of experiencing, or have been found to have, unrelated cybersecurity issues. The Company and affected franchisees are working to verify and resolve these issues.
The Company has revised its reporting methodology for same-restaurant sales, beginning with the first quarter of 2016, to simplify the reporting of its same-restaurant sales performance for reimaged restaurants and to better align with restaurant-industry practice.
Under the new methodology, the Company includes restaurants in its comparable sales base as soon as reimaged restaurants reopen. Reimaged restaurants previously entered the comparable sales base after they had been open for three continuous months.
The reporting methodology for new restaurants remains unchanged; i.e., new restaurants will enter the comparable sales base after they have been open for at least 15 continuous months.
The change in methodology did not impact reported 2016 first-quarter North America system same-restaurant sales results.
The Company will host a conference call today at 9 a.m. ET, with a simultaneous webcast from the Investors section of the Company's website at www.aboutwendys.com. The live conference call will be available at (877) 572-6014 or, for international callers, at (281) 913-8524. An archived webcast will be available on the Company's website at www.aboutwendys.com.
This news release contains certain statements that are not historical facts, including, most importantly, information concerning possible or assumed future results of operations of The Wendy's Company and its subsidiaries (collectively, 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"). In addition, all statements that address future operating, financial or business performance; strategies, initiatives or expectations; future synergies, efficiencies or overhead savings; anticipated costs or charges; future capitalization; 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 the Company's expectations at the time, speak only as of the dates they are made and are susceptible to a number of risks, uncertainties and other factors. The Company's actual results, performance and achievements may differ materially from any future results, performance or achievements expressed in or implied by the forward-looking statements. For all forward-looking statements, the Company claims the protection of the safe harbor for forward-looking statements contained in the Reform Act. Many important factors could affect future results and could cause those results to differ materially from those expressed in or implied by the forward-looking statements. Such factors, all of which are difficult or impossible to predict accurately, and many of which are beyond the Company's 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, high unemployment and decreased consumer spending levels;
(3) the ability to effectively manage the acquisition and disposition of restaurants;
(4) cost and availability of capital;
(5) cost fluctuations associated with food, supplies, energy, fuel, distribution or labor;
(6) the financial condition of the Company's franchisees;
(7) food safety events, including instances of food-borne illness involving the Company or its supply chain;
(8) 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;
(9) risks associated with failures, interruptions or security breaches of the Company's computer systems or technology, or the occurrence of cyber incidents or a deficiency in cyber security that impacts the Company or its franchisees;
(10) the effects of negative publicity that can occur from increased use of social media;
(11) the availability of suitable locations and terms for the development of new restaurants;
(12) risks associated with the Image Activation program;
(13) adoption of new, or changes in, laws, regulations or accounting policies and practices;
(14) changes in debt, equity and securities markets;
(15) goodwill and long-lived asset impairments;
(16) changes in interest rates;
(17) the difficulty in predicting the ultimate costs associated with the sale of Company-operated restaurants to franchisees, employee termination costs, the timing of payments made and received, the results of negotiations with landlords, the impact of the sale of restaurants on ongoing operations, any tax impact from the sale of restaurants and the future impact to the Company's earnings, restaurant operating margins, cash flow and depreciation;
(18) risks associated with the Company's debt refinancing, including the ability to generate sufficient cash flow to meet increased debt service obligations, compliance with operational and financial covenants, and restrictions on the Company's ability to raise additional capital;
(19) risks associated with the amount and timing of share repurchases under the $1.4 billion share repurchase program approved by the Board of Directors; and
(20) other factors cited in the Company's news releases, public statements and/or filings with the Securities and Exchange Commission, including those identified in the "Risk Factors" sections of the Company's Forms 10-K and 10-Q.
The Company's franchisees are independent third parties that the Company does not control. Numerous factors beyond the control of the Company and its franchisees may affect new restaurant openings. Accordingly, there can be no assurance that commitments under development agreements with franchisees will result in new restaurant openings. In addition, numerous factors beyond the control of the Company and its franchisees may affect franchisees' ability to reimage existing restaurants in accordance with the Company's expectations.
All future written and oral forward-looking statements attributable to the Company or any person acting on its 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 the Company to predict these events or their impact.
The Company assumes no obligation to update forward-looking statements as a result of new information, future events or developments, except as required by federal securities laws. The Company does not endorse any projections regarding future performance that may be made by third parties.
There can be no assurance that any additional regular quarterly cash dividends will be declared or paid after the date hereof, or of the amount or timing of such dividends, if any. Future dividend payments, if any, are subject to applicable law, will be made at the discretion of the Board of Directors and will be based on such factors as the Company's earnings, financial condition and cash requirements and other factors.
Adjusted EBITDA, Adjusted EBITDA margin (Adjusted EBITDA divided by total revenues) and Adjusted Earnings per Share, which exclude certain expenses, net of certain benefits, detailed in the reconciliation tables that accompany this release, are used by the Company as performance measures for benchmarking against the Company's peers and competitors, and as internal measures of business operating performance. The Company believes Adjusted EBITDA, Adjusted EBITDA margin and Adjusted Earnings per Share provide a meaningful perspective of the underlying operating performance of the Company's current business. Adjusted EBITDA, Adjusted EBITDA margin and Adjusted Earnings per Share are not recognized terms under U.S. Generally Accepted Accounting Principles ("GAAP"). Because all companies do not calculate Adjusted EBITDA, Adjusted EBITDA margin and Adjusted Earnings per Share (and similarly titled financial measures) in the same way, those measures as used by other companies may not be consistent with the way The Wendy's Company calculates such measures and should not be considered as alternative measures of net income, operating profit margin or earnings per share. Because certain income statement items needed to calculate net income and operating profit margin vary from quarter to quarter, the Company is unable to provide projections of net income, operating profit margin or earnings per share, ora reconciliation of projected Adjusted EBITDA to projected net income, projected Adjusted EBITDA margin to projected operating profit margin, or projected Adjusted Earnings per Share to projected earnings per share.
The Company's presentation of Adjusted EBITDA, Adjusted EBITDA margin and Adjusted Earnings per Share does not replace the presentation of the Company's financial results in accordance with GAAP.
The Wendy's Company is the world's third-largest quick-service hamburger company. The Wendy's system includes approximately 6,500 franchise and Company-operated restaurants in the United States and 28 countries and U.S. territories worldwide. For more information, visitwww.aboutwendys.com.
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SOURCE The Wendy's Company
Peter Koumas
Manager
Investor Relations
(614) 764-8478
peter.koumas@wendys.com
Bob Bertini
Media Relations
(614) 764-3327
bob.bertini@wendys.com