The Wendy's Company Reports Fourth Quarter And Full Year 2020 Results
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The Wendy's Company Reports Fourth Quarter And Full Year 2020 Results

DUBLIN, Ohio, March 3, 2021 // PRNewswire // - The Wendy's Company (Nasdaq: WEN) today reported results for the fourth quarter and fiscal year ended January 3, 2021.

Wendy's® was founded in 1969 by Dave Thomas in Columbus, Ohio. Dave built his business on the premise, “Quality is our Recipe®,” which remains the guidepost of the Wendy’s system. Wendy’s is best known for its made-to-order square hamburgers, using fresh, never frozen beef*, freshly-prepared salads, and other signature items like chili, baked potatoes and the Frosty® dessert. The Wendy’s Company (Nasdaq: WEN) is committed to doing the right thing and making a positive difference in the lives of others. This is most visible through the Company’s support of the Dave Thomas Foundation for Adoption® and its signature Wendy’s Wonderful Kids® program, which seeks to find every child in the North American foster care system a loving, forever home. Today, Wendy’s and its franchisees employ hundreds of thousands of people across more than 6,700 restaurants worldwide with a vision of becoming the world’s most thriving and beloved restaurant brand.

*Fresh beef available in the contiguous U.S., Alaska, and Canada.

"I could not be more proud of our results and the work that was done by the Wendy's® System across the globe in 2020 with all the challenges we faced and overcame during the year.  I am confident that we have emerged as a stronger, more unified brand that is poised to deliver outsized growth" President and Chief Executive Officer Todd Penegor said.  "We accomplished a lot in 2020, including securing our position as the #2 QSR hamburger restaurant chain* in the U.S., achieving our two highest quarterly Global same restaurant sales results in over 15 years, launching our highly successful breakfast daypart, more than doubling our digital sales, enhancing our restaurant economic model, and continuing to enhance access to our brand with net new restaurant development.  As we turn the page to 2021, we remain confident in our playbook of investing smartly to drive accelerated growth behind our three major long-term growth pillars: significantly building our breakfast daypart, accelerating our digital business, and expanding our footprint, both Internationally and in the U.S."

Fourth Quarter and Full Year 2020 Summary

See "Disclosure Regarding Non-GAAP Financial Measures" and the reconciliation tables that accompany this release for a discussion and reconciliation of certain non-GAAP financial measures included in this release.

Operational Highlights

Fourth Quarter

 

Full Year

               
 

2020

 

2019

 

2020

 

2019

               

Systemwide Sales Growth (1)

             

U.S.

14.2%

 

5.9%

 

4.8%

 

4.2%

International(2)

5.5%

 

6.3%

 

(5.5)%

 

6.7%

Global

13.2%

 

5.9%

 

3.7%

 

4.4%

               

Same-Restaurant Sales Growth (1)

             

U.S.

5.5%

 

4.5%

 

2.0%

 

2.9%

International(2)

(2.3)%

 

2.7%

 

(6.0)%

 

3.2%

Global

4.7%

 

4.3%

 

1.2%

 

2.9%

               

Systemwide Sales (In US$ Millions) (3)

             

U.S.

$2,795

 

$2,447

 

$10,231

 

$9,763

International(2)

$323

 

$304

 

$1,107

 

$1,182

Global

$3,118

 

$2,751

 

$11,339

 

$10,944

               

Restaurant Openings

             

U.S. - Total / Net

25 / 7

 

39 / 27

 

98 / 29

 

107 / 42

International - Total / Net

26 / 7

 

32 / 18

 

49 / 11

 

75 / 35

Global - Total / Net

51 / 14

 

71 / 45

 

147 / 40

 

182 / 77

               

Global Reimaging Completion Percentage

       

64%

 

58%

               

(1) Systemwide sales growth and same-restaurant sales growth are calculated on a constant currency basis and include sales by both Company-operated and franchise restaurants. 2020 includes the impact of a 53rd operating week with respect to systemwide sales growth, but excludes the impact of a 53rd operating week with respect to same-restaurant sales.

(2) Excludes Venezuela and Argentina.

(3) Systemwide sales include sales at both Company-operated and franchise restaurants. 2020 includes the impact of a 53rd operating week.

 

* In the 12 months ended December 2020, Wendy's is #2 in traffic share among U.S. QSR burger chains, according to The NPD Group CREST® data

 

Financial Highlights

Fourth Quarter

 

Full Year

                       
 

2020

 

2019

 

B / (W)

 

2020

 

2019

 

B / (W)

                       

(In Millions Except Per Share Amounts)

(Unaudited)

     

(Unaudited)

   
                       

Total Revenues

$

474.3

   

$

427.2

   

11.0

%

 

$

1,733.8

   

$

1,709.0

   

1.5

%

Adjusted Revenues(1)

$

382.1

   

$

341.7

   

11.8

%

 

$

1,400.2

   

$

1,369.5

   

2.2

%

Company-Operated Restaurant Margin

17.6

%

 

14.3

%

 

3.3

%

 

14.9

%

 

15.5

%

 

(0.6)

%

General and Administrative Expense

$

59.3

   

$

53.9

   

(10.0)

%

 

$

206.9

   

$

200.2

   

(3.3)

%

Operating Profit

$

78.6

   

$

36.7

   

114.2

%

 

$

269.3

   

$

262.6

   

2.6

%

Net Income

$

38.7

   

$

26.5

   

46.0

%

 

$

117.8

   

$

136.9

   

(14.0)

%

Adjusted EBITDA

$

114.5

   

$

83.4

   

37.3

%

 

$

420.1

   

$

412.8

   

1.8

%

Reported Diluted Earnings Per Share

$

0.17

   

$

0.11

   

54.5

%

 

$

0.52

   

$

0.58

   

(10.3)

%

Adjusted Earnings Per Share

$

0.17

   

$

0.08

   

112.5

%

 

$

0.57

   

$

0.59

   

(3.4)

%

Cash Flows from Operations

           

$

284.4

   

$

288.9

   

(1.6)

%

Capital Expenditures

           

$

(69.0)

   

$

(74.5)

   

7.4

%

Free Cash Flow(2)

           

$

163.4

   

$

221.0

   

(26.1)

%

                       

(1) Total revenues less advertising funds revenue.

(2) Cash flows from operations minus capital expenditures, the impact of our advertising funds, and, for 2019, the tax effect of gain on

other investments in equity securities.

53rd Week Impact
The fourth quarter and full-year results include the favorable impact of a 53 rd  operating week, which affects all fourth-quarter and full year comparisons to 2019. The 53rd week resulted in the following impacts in 2020:

  • ~7% and ~2% increase to Global systemwide sales in the fourth quarter and full-year, respectively
  • ~$8 million increase to franchise royalties
  • ~$14 million in incremental Company-operated restaurant sales; ~$2.5 million increase to Company-operated restaurant margin
  • ~$2.5 million increase to general and administrative expense
  • ~$8 million in incremental operating profit
  • ~$2.5 million increase to depreciation and amortization
  • ~$2 million increase to interest expense

Fourth Quarter Financial Highlights

Revenues and Adjusted Revenues

The increase in revenues and adjusted revenues was primarily driven by higher sales at Company-operated restaurants and an increase in franchise royalty revenue and fees.  These increases were primarily driven by the impact of the 53rd operating week and an increase in same-restaurant sales driven by the Company's new breakfast daypart in the U.S.

Company-Operated Restaurant Margin

The increase in Company-operated restaurant margin was primarily the result of a higher average check and lower insurance costs. The increase was partially offset by customer count declines as a result of the COVID-19 pandemic and labor cost increases.

General and Administrative Expense

The increase in general and administrative expense was primarily driven by higher professional fees related to IT-related costs and the impact of the 53rd operating week, partially offset by lower travel related expenses as a result of reduced travel due to the COVID-19 pandemic.

Operating Profit

The increase in operating profit resulted primarily from higher franchise royalty revenue and fees, lower franchise support and other costs related to the Company's investments in the prior year to support the U.S. system in advance of its breakfast launch, an increase in Company-operated restaurant margin, and lower reorganization and realignment costs.  These increases were partially offset by an incremental Company investment in breakfast advertising of $6.3 million and higher general and administrative expense.

Net Income

The increase in net income resulted primarily from higher operating profit, partially offset by lower investment income as the result of a cash settlement related to a previously held investment that the Company received in the prior year.

Adjusted EBITDA

The increase in adjusted EBITDA resulted primarily from higher franchise royalty revenue and fees, lower franchise support and other costs, and an increase in Company-operated restaurant margin.  This was partially offset by the incremental Company investment in breakfast advertising, and higher general and administrative expense.

Adjusted Earnings Per Share

The increase in adjusted earnings per share was primarily driven by an increase in adjusted EBITDA.

Full Year Financial Highlights

Revenues and Adjusted Revenues

The increase in revenues and adjusted revenues was primarily driven by higher sales at Company-operated restaurants and an increase in franchisee royalty revenue and fees.  These increases were primarily driven by the impact of the 53rd operating week and an increase in same-restaurant sales driven by the Company's new breakfast daypart in the U.S.

Company-Operated Restaurant Margin

The decrease in Company-operated restaurant margin was primarily the result of customer count declines as a result of the COVID-19 pandemic, labor cost increases, and higher commodity costs. This was partially offset by a higher average check and lower insurance costs.

General and Administrative Expense

The increase in general and administrative expense reflects a $2.8 million reduction in a prior year legal reserve related to the financial institutions case. Excluding this reserve adjustment, general and administrative expense would have increased by approximately $3.9 million, or 2 percent.  The increase was primarily driven by higher professional fees related to IT-related costs, partially offset by lower travel related expenses as a result of reduced travel due to the COVID-19 pandemic and a lower incentive compensation accrual.

Operating Profit

The increase in operating profit resulted primarily from higher franchise royalty revenue and fees and lower franchise support and other costs related to the Company's investments in the prior year to support the U.S. system in advance of its breakfast launch.  These increases were partially offset by an incremental Company investment in breakfast advertising of approximately $14.6 million, higher general and administrative expense, and lower other operating income.

Net Income

The decrease in net income resulted primarily from a cash settlement related to a previously held investment that the Company received in the prior year and lower other income which was primarily due to less interest income earned on cash equivalents.  The decrease was partially offset by the benefit of rolling over a loss on early extinguishment of debt that the Company incurred as part of its debt refinancing in 2019 and a higher operating profit.

Adjusted EBITDA

The increase in adjusted EBITDA resulted primarily from higher franchise royalty revenue and fees and lower franchise support and other costs, partially offset by the incremental Company investment in breakfast advertising, higher general and administrative expense, and lower other operating income.

Adjusted Earnings Per Share

The decrease in adjusted earnings per share was primarily driven by an increase in income taxes due to a higher tax rate that was primarily the result of a tax reserve release the Company recognized in 2019, as well as lower other income, which was primarily due to less interest income earned on cash equivalents. The decrease was partially offset by fewer shares outstanding as a result of the Company's share repurchase programs and an increase in adjusted EBITDA.

Free Cash Flow

The decrease in free cash flow resulted primarily from the settlement of the financial institutions case, higher reorganization and realignment payments, a higher incentive compensation payout for the 2019 fiscal period paid in 2020, and rental payment timing.  Excluding the $18.3 million tax effected payment related to the settlement of the financial institutions case, free cash flow would have been approximately $182 million.

First Quarter Sales off to a Strong Start
Through the week ended February 21, year-to-date U.S. same-restaurant sales increased approximately 6% and Global same-restaurant sales increased approximately 5%.

Company Previously Announced 29% Increase in Quarterly Dividend
On February 23, the Company announced a 29% increase in its regular quarterly cash dividend to 9 cents per share.   The Company believes that its strong liquidity position, along with the momentum it is seeing in its business, supports this increase, while still leaving flexibility to invest in growth.

Share Repurchases
The Company repurchased 0.7 million shares for $16 million in the fourth quarter of 2020 and has repurchased 0.5 million shares for approximately $10 million thus far in the first quarter of 2021.   As of the date of this release, approximately $58 million remains available under the Company's existing $100 million share repurchase authorization that expires in February 2022.

2021 Outlook
This release includes forward-looking projections for certain non-GAAP financial measures, including systemwide sales, adjusted EBITDA, adjusted earnings per share and free cash flow. The Company excludes certain expenses and benefits from adjusted EBITDA, adjusted earnings per share and free cash flow, such as the impact from our advertising funds, including the net change in the restricted operating assets and liabilities and any excess or deficit of advertising funds revenues over advertising funds expenses, impairment of long-lived assets, reorganization and realignment costs, system optimization (gains) losses, net, and the timing and resolution of certain tax matters. Due to the uncertainty and variability of the nature and amount of those expenses and benefits, the Company is unable without unreasonable effort to provide projections of net income, earnings per share or net cash provided by operating activities, or a reconciliation of those projected measures.

During 2021, the Company Expects:

  • Global systemwide sales growth: 6 to 8 percent (excluding the impact of the 53rd week)
  • Adjusted EBITDA: $445 to $455 million
  • Adjusted earnings per share: $0.67 to $0.69
  • Cash flows from operations: $310 to $330 million
  • Capital Expenditures: $80 to $90 million
  • Free cash flow: $230 to $240 million

Conference Call and Webcast Scheduled for 8:30 a.m. Today, March 3

The Company will host a conference call on Wednesday, March 3 at 8:30 a.m. ET, with a simultaneous webcast from the Company's Investor Relations website.  The related presentation materials will also be available on the Company's Investor Relations website. The live conference call will be available by telephone. An archived webcast and presentation materials will be available on the Company's Investor Relations website.

Forward-Looking Statements
This release contains certain statements that are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 (the "Reform Act").  Generally, forward-looking statements include the words "may," "believes," "plans," "expects," "anticipates," "intends," "estimate," "goal," "upcoming," "outlook," "guidance" or the negation thereof, or similar expressions.  In addition, all statements that address future operating, financial or business performance, strategies or initiatives, future efficiencies or savings, anticipated costs or charges, future capitalization, anticipated impacts of recent or pending investments or transactions and statements expressing general views about future results or brand health are forward-looking statements within the meaning of the Reform Act.  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.  For all such forward-looking statements, the Company claims the protection of the safe harbor for forward-looking statements contained in the Reform Act.  The Company's actual results, performance and achievements may differ materially from any future results, performance or achievements expressed or implied by the Company's forward-looking statements.

Many important factors could affect the Company's future results and cause those results to differ materially from those expressed in or implied by the Company's forward-looking statements.  Such factors include, but are not limited to, the following: (1) disruption to the Company's business from the novel coronavirus (COVID-19) pandemic and the impact of the pandemic on the Company's results of operations, financial condition and prospects; (2) the impact of competition or poor customer experiences at Wendy's restaurants; (3) economic disruptions, including in regions with a high concentration of Wendy's restaurants; (4) changes in discretionary consumer spending and consumer tastes and preferences; (5) impacts to the Company's corporate reputation or the value and perception of the Company's brand; (6) the effectiveness of the Company's marketing and advertising programs and new product development; (7) the Company's ability to manage the accelerated impact of social media; (8) the Company's ability to protect its intellectual property; (9) food safety events or health concerns involving the Company's products; (10) the Company's ability to achieve its growth strategy through new restaurant development and its Image Activation program; (11) the Company's ability to effectively manage the acquisition and disposition of restaurants or successfully implement other strategic initiatives; (12) risks associated with leasing and owning significant amounts of real estate, including environmental matters; (13) the Company's ability to achieve and maintain market share in the breakfast daypart; (14) risks associated with the Company's international operations, including the ability to execute its international growth strategy; (15) changes in commodity and other operating costs; (16) shortages or interruptions in the supply or distribution of the Company's products and other risks associated with the Company's independent supply chain purchasing co-op; (17) the impact of increased labor costs or labor shortages; (18) the continued succession and retention of key personnel and the effectiveness of the Company's leadership structure; (19) risks associated with the Company's digital commerce strategy, platforms and technologies, including its ability to adapt to changes in industry trends and consumer preferences; (20) the Company's dependence on computer systems and information technology, including risks associated with the failure, misuse, interruption or breach of its systems or technology or other cyber incidents or deficiencies; (21) risks associated with the Company's securitized financing facility and other debt agreements, including compliance with operational and financial covenants, restrictions on its ability to raise additional capital, the impact of its overall debt levels and the Company's ability to generate sufficient cash flow to meet its debt service obligations and operate its business; (22) risks associated with the Company's capital allocation policy, including the amount and timing of equity and debt repurchases and dividend payments; (23) risks associated with complaints and litigation, compliance with legal and regulatory requirements and an increased focus on environmental, social and governance issues; (24) risks associated with the availability and cost of insurance, changes in accounting standards, the recognition of impairment or other charges, the impact of realignment and reorganization initiatives, changes in tax rates or tax laws and fluctuations in foreign currency exchange rates; (25) conditions beyond the Company's control, such as adverse weather conditions, natural disasters, hostilities, social unrest, health epidemics or pandemics or other catastrophic events; and (26) other risks and uncertainties cited in the Company's 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.

In addition to the factors described above, there are risks associated with the Company's predominantly franchised business model that could impact its results, performance and achievements. Such risks include the Company's ability to identify, attract and retain experienced and qualified franchisees and effectively manage the transfer of restaurants between and among franchisees, the business and financial health of franchisees, the ability of franchisees to meet their royalty, advertising, development, reimaging and other commitments,  participation by franchisees in brand strategies and the fact that franchisees are independent third parties that own, operate and are responsible for overseeing the operations of their restaurants.  The Company's predominantly franchised business model may also impact the ability of the Wendy's system to effectively respond and adapt to market changes. Many of these risks have been or in the future may be heightened due to the business disruption and impact from the COVID-19 pandemic.

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 how they may affect the Company.

The Company assumes no obligation to update any forward-looking statements after the date of this release as a result of new information, future events or developments, except as required by federal securities laws, although the Company may do so from time to time. 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 factors such as the Company's earnings, financial condition and cash requirements and other factors.

Disclosure Regarding Non-GAAP Financial Measures
In addition to the financial measures presented in this release in accordance with U.S. Generally Accepted Accounting Principles ("GAAP"), the Company has included certain non-GAAP financial measures in this release, including adjusted revenue, adjusted EBITDA, adjusted earnings per share, free cash flow and systemwide sales.

The Company uses adjusted revenue, adjusted EBITDA, adjusted earnings per share and systemwide sales as internal measures of business operating performance and as performance measures for benchmarking against the Company's peers and competitors.  Adjusted EBITDA and systemwide sales are also used by the Company in establishing performance goals for purposes of executive compensation.  The Company believes its presentation of adjusted revenue, adjusted EBITDA, adjusted earnings per share and systemwide sales provides a meaningful perspective of the underlying operating performance of our current business and enables investors to better understand and evaluate our historical and prospective operating performance.  The Company believes these non-GAAP financial measures are important supplemental measures of operating performance because they eliminate items that vary from period to period without correlation to our core operating performance and highlight trends in our business that may not otherwise be apparent when relying solely on GAAP financial measures.  Due to the nature and/or size of the items being excluded, such items do not reflect future gains, losses, expenses or benefits and are not indicative of our future operating performance.  The Company believes investors, analysts and other interested parties use adjusted revenue, adjusted EBITDA, adjusted earnings per share and systemwide sales in evaluating issuers, and the presentation of these measures facilitates a comparative assessment of the Company's operating performance in addition to the Company's performance based on GAAP results.

This release also includes disclosure regarding the Company's free cash flow.  Free cash flow is a non-GAAP financial measure that is used by the Company as an internal measure of liquidity.  Free cash flow is also used by the Company in establishing performance goals for purposes of executive compensation.  The Company defines free cash flow as cash flows from operations minus (i) capital expenditures and (ii) the net change in the restricted operating assets and liabilities of the advertising funds and any excess/deficit of advertising funds revenue over advertising funds expense included in net income, as reported under GAAP.  The impact of our advertising funds is excluded because the funds are used solely for advertising and are not available for the Company's working capital needs. The Company may also make additional adjustments for certain non-recurring or unusual items as detailed in the reconciliation tables that accompany this release. The Company believes free cash flow is an important liquidity measure for investors and other interested persons because it communicates how much cash flow is available for working capital needs or to be used for repurchasing shares, paying dividends, repaying or refinancing debt, financing possible acquisitions or investments or other uses of cash.

Adjusted revenue, adjusted EBITDA, adjusted earnings per share, free cash flow and systemwide sales are not recognized terms under GAAP, and the Company's presentation of these non-GAAP financial measures does not replace the presentation of the Company's financial results in accordance with GAAP.  Because all companies do not calculate adjusted revenue, adjusted EBITDA, adjusted earnings per share, free cash flow and systemwide sales (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.  The non-GAAP financial measures included in this release should not be construed as substitutes for or better indicators of the Company's performance than the most directly comparable GAAP financial measures.  See the reconciliation tables that accompany this release for additional information regarding certain of the non-GAAP financial measures included herein.

Key Business Measures
The Company tracks its results of operations and manages its business using certain key business measures, including same-restaurant sales, systemwide sales and Company-operated restaurant margin, which are measures commonly used in the quick-service restaurant industry that are important to understanding Company performance.

Same-restaurant sales and systemwide sales each include sales by both Company-operated and franchise restaurants. The Company reports same-restaurant sales for new restaurants after they have been open for 15 continuous months and for reimaged restaurants as soon as they reopen. Restaurants temporarily closed for more than one fiscal week are excluded from same-restaurant sales. For fiscal 2020, same-restaurant sales excludes the impact of a 53rd operating week. Same-restaurant sales compares the 52 weeks from December 30, 2019 through December 27, 2020 to the 52 weeks from December 31, 2018 through December 29, 2019. For fiscal 2021, same-restaurant sales will compare the 52 weeks from January 4, 2021 through January 2, 2022 to the 52 weeks from January 6, 2020 through January 3, 2021.

Franchise restaurant sales are reported by our franchisees and represent their revenues from sales at franchised Wendy's restaurants.  Sales by franchise restaurants are not recorded as Company revenues and are not included in the Company's consolidated financial statements. However, the Company's royalty revenues are computed as percentages of sales made by Wendy's franchisees and, as a result, sales by franchisees have a direct effect on the Company's royalty revenues and profitability.

Same-restaurant sales and systemwide sales exclude sales from Venezuela and Argentina due to the highly inflationary economies of those countries.

The Company calculates same-restaurant sales and systemwide sales growth on a constant currency basis. Constant currency results exclude the impact of foreign currency translation and are derived by translating current year results at prior year average exchange rates. The Company believes excluding the impact of foreign currency translation provides better year over year comparability.

Company-operated restaurant margin is defined as sales from Company-operated restaurants less cost of sales divided by sales from Company-operated restaurants. Cost of sales includes food and paper, restaurant labor and occupancy, advertising and other operating costs.

*Fresh beef available in the contiguous U.S., Alaska, and Canada.

 

The Wendy ' s Company and Subsidiaries
Consolidated Statements of Operations
Three and Twelve Month Periods Ended January 3, 2021 and December 29, 2019
(In Thousands Except Per Share Amounts)
(Unaudited)

 
 

Three Months Ended

 

Twelve Months Ended

 

2020

 

2019

 

2020

 

2019

Revenues:

             

Sales

$

199,803

   

$

176,761

   

$

722,764

   

$

707,485

 

Franchise royalty revenue and fees

123,104

   

108,766

   

444,749

   

428,999

 

Franchise rental income

59,214

   

56,134

   

232,648

   

233,065

 

Advertising funds revenue

92,196

   

85,530

   

333,664

   

339,453

 
 

474,317

   

427,191

   

1,733,825

   

1,709,002

 

Costs and expenses:

             

Cost of sales

164,737

   

151,434

   

614,907

   

597,530

 

Franchise support and other costs

7,037

   

23,863

   

26,464

   

43,686

 

Franchise rental expense

32,589

   

31,087

   

125,613

   

123,929

 

Advertising funds expense

92,007

   

81,085

   

345,360

   

338,116

 

General and administrative

59,323

   

53,940

   

206,876

   

200,206

 

Depreciation and amortization

34,049

   

33,718

   

132,775

   

131,693

 

System optimization gains, net

(815)

   

(121)

   

(3,148)

   

(1,283)

 

Reorganization and realignment costs

5,834

   

12,194

   

16,030

   

16,965

 

Impairment of long-lived assets

3,310

   

5,315

   

8,037

   

6,999

 

Other operating income, net

(2,321)

   

(2,041)

   

(8,397)

   

(11,418)

 
 

395,750

   

390,474

   

1,464,517

   

1,446,423

 

Operating profit

78,567

   

36,717

   

269,308

   

262,579

 

Interest expense, net

(31,041)

   

(29,028)

   

(117,737)

   

(115,971)

 

Loss on early extinguishment of debt

   

(1,346)

   

   

(8,496)

 

Investment income (loss), net

4

   

24,599

   

(225)

   

25,598

 

Other income, net

107

   

1,605

   

1,449

   

7,771

 

Income before income taxes

47,637

   

32,547

   

152,795

   

171,481

 

Provision for income taxes

(8,903)

   

(6,014)

   

(34,963)

   

(34,541)

 

Net income

$

38,734

   

$

26,533

   

$

117,832

   

$

136,940

 
               

Net income per share:

             

Basic

$

.17

   

$

.12

   

$

.53

   

$

.60

 

Diluted

.17

   

.11

   

.52

   

.58

 
               

Number of shares used to calculate basic income 
     per share

224,139

   

227,441

   

223,684

   

229,944

 
               

Number of shares used to calculate diluted income 
     per share

228,521

   

232,594

   

228,014

   

235,075

 

 

The Wendy ' s Company and Subsidiaries
Consolidated Balance Sheets
As of January 3, 2021 and December 29, 2019
(In Thousands Except Par Value)
(Unaudited)

 
 

January 3,

2021

 

December 29,

2019

ASSETS

     

Current assets:

     

Cash and cash equivalents

$

306,989

   

$

300,195

 

Restricted cash

33,973

   

34,539

 

Accounts and notes receivable, net

109,891

   

117,461

 

Inventories

4,732

   

3,891

 

Prepaid expenses and other current assets

89,732

   

15,585

 

Advertising funds restricted assets

142,306

   

82,376

 

Total current assets

687,623

   

554,047

 

Properties

915,889

   

977,000

 

Finance lease assets

206,153

   

200,144

 

Operating lease assets

821,480

   

857,199

 

Goodwill

751,049

   

755,911

 

Other intangible assets

1,224,960

   

1,247,212

 

Investments

44,574

   

45,949

 

Net investment in sales-type and direct financing leases

268,221

   

256,606

 

Other assets

120,057

   

100,461

 

Total assets

$

5,040,006

   

$

4,994,529

 
       

LIABILITIES AND STOCKHOLDERS' EQUITY

     

Current liabilities:

     

Current portion of long-term debt

$

28,962

   

$

22,750

 

Current portion of finance lease liabilities

12,105

   

11,005

 

Current portion of operating lease liabilities

45,346

   

43,775

 

Accounts payable

31,063

   

22,701

 

Accrued expenses and other current liabilities

155,321

   

165,272

 

Advertising funds restricted liabilities

140,511

   

84,195

 

Total current liabilities

413,308

   

349,698

 

Long-term debt

2,218,163

   

2,257,561

 

Long-term finance lease liabilities

506,076

   

480,847

 

Long-term operating lease liabilities

865,325

   

897,737

 

Deferred income taxes

280,755

   

270,759

 

Deferred franchise fees

89,094

   

91,790

 

Other liabilities

117,689

   

129,778

 

Total liabilities

4,490,410

   

4,478,170

 

Commitments and contingencies

     

Stockholders' equity:

     

Common stock, $0.10 par value; 1,500,000 shares authorized; 470,424 shares 
     issued; 224,268 and 224,889 shares outstanding, respectively

47,042

   

47,042

 

Additional paid-in capital

2,899,276

   

2,874,001

 

Retained earnings

238,674

   

185,725

 

Common stock held in treasury, at cost; 246,156 and 245,535 shares, respectively

(2,585,755)

   

(2,536,581)

 

Accumulated other comprehensive loss

(49,641)

   

(53,828)

 

Total stockholders' equity

549,596

   

516,359

 

Total liabilities and stockholders' equity

$

5,040,006

   

$

4,994,529

 

 

The Wendy's Company and Subsidiaries
Consolidated Statements of Cash Flows
Twelve Month Periods Ended January 3, 2021 and December 29, 2019
(In Thousands)
(Unaudited)

 
 

Twelve Months Ended

 

2020

 

2019

Cash flows from operating activities:

     

Net income

$

117,832

   

$

136,940

 

Adjustments to reconcile net income to net cash provided by operating activities:

     

Depreciation and amortization

132,775

   

131,693

 

Share-based compensation

18,930

   

18,676

 

Impairment of long-lived assets

8,037

   

6,999

 

Deferred income tax

10,266

   

837

 

Non-cash rental expense, net

28,937

   

28,202

 

Change in operating lease liabilities

(40,905)

   

(41,911)

 

Net receipt (recognition) of deferred vendor incentives

2,495

   

(501)

 

System optimization gains, net

(3,148)

   

(1,283)

 

Gain on sale of investments, net

   

(24,496)

 

Distributions received from TimWen joint venture

8,376

   

13,400

 

Equity in earnings in joint ventures, net

(6,096)

   

(8,673)

 

Long-term debt-related activities, net (see below)

6,723

   

15,317

 

Other, net

(6,438)

   

(4,838)

 

Changes in operating assets and liabilities:

     

Accounts and notes receivable, net

(16,243)

   

16,935

 

Inventories

(841)

   

(163)

 

Prepaid expenses and other current assets

(8,780)

   

(1,569)

 

Advertising funds restricted assets and liabilities

49,052

   

(2,720)

 

Accounts payable

1,620

   

1,054

 

Accrued expenses and other current liabilities

(18,231)

   

5,034

 

Net cash provided by operating activities

284,361

   

288,933

 

Cash flows from investing activities:

     

Capital expenditures

(68,969)

   

(74,453)

 

Acquisitions

(4,879)

   

(5,052)

 

Dispositions

6,091

   

3,448

 

Proceeds from sale of investments

169

   

24,496

 

Notes receivable, net

(662)

   

(3,370)

 

Payments for investments

   

 

Net cash used in investing activities

(68,250)

   

(54,931)

 

Cash flows from financing activities:

     

Proceeds from long-term debt

153,315

   

850,000

 

Repayments of long-term debt

(191,462)

   

(899,800)

 

Repayments of finance lease liabilities

(8,383)

   

(6,835)

 

Deferred financing costs

(2,122)

   

(14,008)

 

Repurchases of common stock, including accelerated share repurchase

(62,173)

   

(217,797)

 

Dividends

(64,866)

   

(96,364)

 

Proceeds from stock option exercises

23,361

   

28,328

 

Payments related to tax withholding for share-based compensation

(5,577)

   

(8,820)

 

Contingent consideration payment

   

 

Net cash used in financing activities

(157,907)

   

(365,296)

 

Net cash provided by (used in) operations before effect of exchange rate changes on cash

58,204

   

(131,294)

 

Effect of exchange rate changes on cash

1,330

   

3,489

 

Net increase (decrease) in cash, cash equivalents and restricted cash

59,534

   

(127,805)

 

Cash, cash equivalents and restricted cash at beginning of period

358,707

   

486,512

 

Cash, cash equivalents and restricted cash at end of period

$

418,241

   

$

358,707

 

 

The Wendy ' s Company and Subsidiaries
Reconciliations of Net Income to Adjusted EBITDA and Revenues to Adjusted Revenues
Three and Twelve Month Periods Ended January 3, 2021 and December 29, 2019
(In Thousands)
(Unaudited)

 
 

Three Months Ended

 

Twelve Months Ended

 

2020

 

2019

 

2020

 

2019

               

Net income

$

38,734

   

$

26,533

   

$

117,832

   

$

136,940

 

Provision for income taxes

8,903

   

6,014

   

34,963

   

34,541

 

Income before income taxes

47,637

   

32,547

   

152,795

   

171,481

 

Other income, net

(107)

   

(1,605)

   

(1,449)

   

(7,771)

 

Investment (income) loss, net

(4)

   

(24,599)

   

225

   

(25,598)

 

Loss on early extinguishment of debt

   

1,346

   

   

8,496

 

Interest expense, net

31,041

   

29,028

   

117,737

   

115,971

 

Operating profit

78,567

   

36,717

   

269,308

   

262,579

 

Plus (less):

             

Advertising funds revenue

(92,196)

   

(85,530)

   

(333,664)

   

(339,453)

 

Advertising funds expense (a)

85,745

   

81,085

   

330,760

   

338,116

 

Depreciation and amortization

34,049

   

33,718

   

132,775

   

131,693

 

System optimization gains, net

(815)

   

(121)

   

(3,148)

   

(1,283)

 

Reorganization and realignment costs

5,834

   

12,194

   

16,030

   

16,965

 

Impairment of long-lived assets

3,310

   

5,315

   

8,037

   

6,999

 

Legal reserve for Financial Institutions case

   

   

   

(2,829)

 

Adjusted EBITDA

$

114,494

   

$

83,378

   

$

420,098

   

$

412,787

 
               

Revenues

$

474,317

   

$

427,191

   

$

1,733,825

   

$

1,709,002

 

Less:

             

Advertising funds revenue

(92,196)

   

(85,530)

   

(333,664)

   

(339,453)

 

Adjusted revenues

$

382,121

   

$

341,661

   

$

1,400,161

   

$

1,369,549

 

 

(a)

For the three and twelve months ended January 3, 2021, excludes advertising funds expense of $6,262 and $14,600, respectively, related to the Company funding of incremental advertising during 2020.

 

The Wendy ' s Company and Subsidiaries
Reconciliation of Net Income and Diluted Earnings Per Share to
Adjusted Income and Adjusted Earnings Per Share
Three and Twelve Month Periods Ended January 3, 2021 and December 29, 2019
(In Thousands Except Per Share Amounts)
(Unaudited)

 
 

Three Months Ended

 

Twelve Months Ended

 

2020

 

2019

 

2020

 

2019

               

Net income

$

38,734

   

$

26,533

   

$

117,832

   

$

136,940

 

Plus (less):

             

Advertising funds revenue

(92,196)

   

(85,530)

   

(333,664)

   

(339,453)

 

Advertising funds expense (a)

85,745

   

81,085

   

330,760

   

338,116

 

System optimization gains, net

(815)

   

(121)

   

(3,148)

   

(1,283)

 

Reorganization and realignment costs

5,834

   

12,194

   

16,030

   

16,965

 

Impairment of long-lived assets

3,310

   

5,315

   

8,037

   

6,999

 

Loss on early extinguishment of debt

   

1,346

   

   

8,496

 

Gain on other investments in equity securities

   

(24,366)

   

   

(24,366)

 

Legal reserve for Financial Institutions case

   

   

   

(2,829)

 

Total adjustments

1,878

   

(10,077)

   

18,015

   

2,645

 

Income tax impact on adjustments (b)

(2,161)

   

1,769

   

(6,727)

   

(852)

 

Total adjustments, net of income taxes

(283)

   

(8,308)

   

11,288

   

1,793

 
               

Adjusted income

$

38,451

   

$

18,225

   

$

129,120

   

$

138,733

 
               

Diluted earnings per share

$

.17

   

$

.11

   

$

.52

   

$

.58

 

Total adjustments per share, net of income taxes

.00

   

(.03)

   

.05

   

.01

 

Adjusted earnings per share

$

.17

   

$

.08

   

$

.57

   

$

.59

 

 

(a)

For the three and twelve months ended January 3, 2021, excludes advertising funds expense of $6,262 and $14,600, respectively, related to the Company funding of incremental advertising during 2020.

(b)

The provision for (benefit from) income taxes on "System optimization gains, net" was $213 and $374 for the three months ended January 3, 2021 and December 29, 2019, respectively, and $(515) and $482 for the twelve months ended January 3, 2021 and December 29, 2019, respectively.  The provision for (benefit from) income taxes on all other adjustments (excluding the advertising funds adjustments) was calculated using an effective tax rate of 25.96% and 25.31% for the three months ended January 3, 2021 and December 29, 2019, respectively, and 25.81% and 25.33% for the twelve months ended January 3, 2021 and December 29, 2019, respectively.

 

The Wendy's Company and Subsidiaries
Reconciliation of Net Cash Provided by Operating Activities to Free Cash Flow

Twelve Month Periods Ended January 3, 2021 and December 29, 2019
(In Thousands)
(Unaudited)

 
 

Twelve Months Ended

 

2020

 

2019

Net cash provided by operating activities

$

284,361

   

$

288,933

 

Less:

     

Capital expenditures

(68,969)

   

(74,453)

 

Advertising funds impact (a)

(51,956)

   

1,383

 

Tax effect of gain on other investments in equity securities

   

5,117

 

Free cash flow

$

163,436

   

$

220,980

 

 

(a)

Advertising funds impact for 2020 and 2019 includes the net change in the restricted operating assets and liabilities of the funds of $49,052 and $(2,720), respectively, and the advertising funds surplus included in Net income of $2,904 and $1,337, respectively.  Advertising funds impact for 2020 excludes the Company's incremental funding of advertising of $14,600.

SOURCE Wendy's

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