Fourth-Quarter Adjusted EBITDA Increased 19% to $95.9 Million
Full-Year Adjusted EBITDA Increased 1% to $333.3 Million;
Positive Momentum from Brand Transformation Continues in 2013
Company Remains on Track to Reimage 100 Restaurants in 2013
Continues to Target 100 Franchise Restaurant Reimages in 2013
Company Reiterates 2013 Adjusted EBITDA Outlook of $350 to $360 million and Adjusted EPS Outlook of $0.18 to $0.20
February 28, 2013 // Franchising.com // DUBLIN, Ohio - The Wendy's Company (NASDAQ: WEN) today reported audited results for the fiscal year ended Dec. 30, 2012. The Company had previously issued preliminary unaudited results for the 2012 fourth quarter and full year on Jan. 16, 2013.
The Company's 2012 fourth-quarter and full-year Adjusted EBITDA results of $95.9 million and $333.3 million, respectively, remain unchanged from the preliminary results. Fourth-quarter Adjusted EBITDA increased 19 percent compared to the fourth quarter of 2011, while full-year Adjusted EBITDA increased 1 percent compared to 2011.
See "Disclosure Regarding Non-GAAP Financial Measures" below for a reconciliation of the non-GAAP measures (i.e., Adjusted EBITDA from continuing operations and Adjusted Earnings Per Share from continuing operations) included herein, and see "Changes from 2012 Preliminary Results" below for a description of changes in the Company's audited 2012 results compared to its preliminary unaudited results.
The Company recently announced that it would contemporize its brand logo for the first time since 1983, as part of brand transformation that is currently under way to position the Wendy's® brand as "A Cut Above." The contemporized logo began appearing this week in Wendy's advertising. The logo will also begin appearing on product packaging, crew uniforms, new restaurant signage, menu boards and digital assets.
"Our brand transformation accelerated with Image Activation during 2012, and our 'A Cut Above' brand positioning has continued to gain traction with consumers," said President and Chief Executive Officer Emil Brolick. "Our 2012 North America same-store sales growth of 1.6 percent and record-high average annual restaurant sales of $1.48 million are evidence that our growth initiatives are beginning to work, and we are optimistic about our product pipeline and marketing plans for 2013.
"As a key part of the brand transformation, we also reinvented our price-value offering to consumers," Brolick said. In January, Wendy's introduced a new "Right Price, Right Size" value menu, which includes six items with suggested pricing at 99 cents and eight additional items with suggested pricing between $1.19 and $1.79. Wendy's is also currently promoting its Premium North Pacific Cod Fillet sandwich for a limited time.
Brolick said the Company's product/price segmentation strategy of focusing on core products, premium limited-time offerings, and a solid price-value proposition with its "Right Price, Right Size" menu is translating into positive results in early 2013. "Despite the federal payroll tax increase, rising gasoline prices, and challenging weather conditions in certain markets, our first quarter is off to a solid start," Brolick said.
For 2013, the Company reiterated its outlook for Adjusted EBITDA of $350 million to $360 million and Adjusted Earnings Per Share of $0.18 to $0.20. Estimated 2013 Adjusted Earnings Per Share excludes $20 to $30 million of anticipated pretax depreciation for existing assets that will be replaced as part of the Company's Image Activation initiative. The Company expects its total 2013 depreciation and amortization to increase 15 to 20 percent compared to 2012.
Also included in the 2013 outlook is:
The Company's outlook for 2013 Adjusted EBITDA of $350 million to $360 million also includes:
The Company's outlook for 2013 Adjusted EBITDA of $350 million to $360 million also includes:
Higher year-over-year profitability in each of the first three quarters, with gradually declining growth rates
Lower year-over-year profitability in the fourth quarter, due primarily to the anticipated franchisee incentive expense of about $10 million
"Based on the progress with our "Recipe to Win" strategy, including the expansion of Image Activation, we continue to target long-term Adjusted EBITDA and Adjusted Earnings Per Share growth beyond 2013 in the high single-digit to low double-digit range," said Brolick.
As previously announced, the Company is offering an incentive program to qualified franchisees completing Image Activation restaurant reimages during 2013. The Company recently expanded this program to include all three of its Image Activation tiers and has subsequently received franchisee applications for more than 100 reimages in 2013 across all three tiers. The tiers range in targeted investment levels from approximately $375,000 to $750,000, excluding deferred maintenance costs. The Company expects to record approximately $10 million in incremental year-over-year G&A expense related to the incentive program during the fourth quarter of 2013.
"We are excited about the positive response from our franchisees to the Image Activation incentive program," said Chief Financial Officer Steve Hare. "Sales volumes at Company-operated Image Activation restaurants have increased on average by more than 25 percent, and we remain on track to reimage more than 600 Company-operated restaurants by the end of 2015, which is nearly half of our Company restaurant portfolio. We expect the number of reimaged franchised restaurants to continue to increase over the next three years, as our brand transformation momentum continues to build."
The Company revised its 2012 fourth-quarter and full-year preliminary unaudited results as follows:
The total after-tax effect of these changes increased reported fourth-quarter and full-year net income from continuing operations by $4.0 million, or one cent per share, in the Company's audited 2012 results compared to its 2012 preliminary unaudited results reported Jan. 16, 2013.
On Feb. 13, 2013, the Company announced the declaration of its regular quarterly cash dividend of $0.04 per share. The dividend is payable on March 15, 2013, to stockholders of record as of March 1, 2013.
During the fourth quarter of 2012, the Company's Board of Directors authorized a 100 percent increase in the quarterly cash dividend rate from $0.02 to $0.04 per share, effective with the Company's December 2012 dividend.
During the fourth quarter, the Company's Board of Directors also authorized a share repurchase program for up to $100 million of the Company's common stock through Dec. 29, 2013. The common stock repurchase program allows the Company to make repurchases as market conditions warrant and to the extent legally permissible. The Company did not repurchase any shares during 2012 or the first two months of 2013.
"We are confident that our balance sheet and strong cash flow provide us the capacity to fund our Image Activation initiative and also return capital to shareholders in the form of dividends and share repurchases," Hare said.
As previously announced, the Company revised its reporting methodology for same-store sales, beginning with the first quarter of 2012, to more accurately reflect same-store sales performance, including the impact of its new and remodeled restaurants.
Using the new methodology, the Company calculates same-store sales beginning after new restaurants have been open for at least 15 continuous months and after remodeled restaurants have been reopened for three continuous months. The calculation of same-store sales previously began after a restaurant had been open for at least 15 continuous months and as of the beginning of the previous fiscal year.
Under the new methodology, same-store sales at North America Company-operated restaurants decreased 0.2 percent for the fourth quarter and increased 1.6 percent for the full year. Under the old methodology, same-store sales at North America Company-operated restaurants would have decreased approximately 0.4 percent for the fourth quarter and would have increased approximately 1.5 percent for the full year. The new methodology had virtually no impact on results reported prior to 2012.
The Company will host a conference call today at 10 a.m. ET, with a simultaneous webcast from the investor relations section of the Company's website at www.aboutwendys.com. Hosting the call will be President and Chief Executive Officer Emil Brolick, Chief Financial Officer Steve Hare and Chief Communications Officer John Barker. The live conference call will be available at (877) 572-6014 or, for international callers, at (281) 913-8524.
An archived webcast with the accompanying slides will be available on the Company's website at www.aboutwendys.com.
The Company plans to release its first-quarter results before the market opens on May 8 and host a conference call at 10 a.m. ET the same day with a simultaneous webcast from the investor relations section of the Company's Web site at www.aboutwendys.com. The live conference call will be available at (877) 572-6014 or, for international callers, at (281) 913-8524.
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"). 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; 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 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. 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:
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.
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.
Adjusted EBITDA from continuing operations and Adjusted Earnings Per Share from continuing operations, 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 from continuing operations and Adjusted Earnings Per Share from continuing operations provide a meaningful perspective of the underlying operating performance of the Company’s current business. Adjusted EBITDA from continuing operations and Adjusted Earnings Per Share from continuing operations are not recognized terms under U.S. Generally Accepted Accounting Principles (“GAAP”).
Because all companies do not calculate Adjusted EBITDA from continuing operations and Adjusted Earnings Per Share from continuing operations (and 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 such measures and should not be considered as alternative measures of income from continuing operations or earnings per share from continuing operations.
Because certain income statement items needed to calculate income from continuing operations vary from quarter to quarter, the Company is unable to provide projections of income from continuing operations or earnings per share from continuing operations, or a reconciliation of projected Adjusted EBITDA from continuing operations to projected income from continuing operations or projected Adjusted Earnings Per Share from continuing operations to projected earnings per share from continuing operations.
The Company’s presentation of Adjusted EBITDA from continuing operations and Adjusted Earnings Per Share from continuing operations 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 more than 6,500 franchise and Company-operated restaurants in the United States and 27 countries and U.S. territories worldwide. For more information, visit aboutwendys.com or wendys.com.