The Wendy's Company Reports Third Quarter 2021 Results
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The Wendy's Company Reports Third Quarter 2021 Results

DUBLIN, Ohio, Nov. 10, 2021 // PRNewswire // - The Wendy's Company (Nasdaq: WEN) today reported unaudited results for the third quarter ended October 3, 2021.

We are extremely proud of the progress we are making against our three strategic growth pillars," President and Chief Executive Officer Todd Penegor said.  "We continued to grow our breakfast business, digital sales accelerated, and we meaningfully expanded our global footprint in the third quarter.  Global Same-Restaurant sales grew in the high-single digits on a 2-year basis, reinforcing the strength of our brand in a challenging environment.  Our focus on executing against our key priorities and our continued partnership with the best franchisees in the business give me confidence that we will achieve our vision of becoming the world's most thriving and beloved restaurant brand."

Third Quarter 2021 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

Third Quarter

 

Year-to-Date

               
 

2021

 

2020

 

2021

 

2020

               

Systemwide Sales Growth (1)

             

U.S.

3.7%

 

7.9%

 

12.1%

 

1.6%

International(2)

20.2%

 

(3.5)%

 

23.6%

 

(9.3)%

Global

5.3%

 

6.7%

 

13.2%

 

0.5%

               

Same-Restaurant Sales Growth (1)

             

U.S.

2.1%

 

7.0%

 

10.2%

 

0.9%

International(2)

14.7%

 

(2.1)%

 

17.4%

 

(7.3)%

Global

3.3%

 

6.1%

 

10.9%

 

—%

               

Systemwide Sales (In US$ Millions) (3)

             

U.S.

$2,791

 

$2,692

 

$8,336

 

$7,436

International(2)

$362

 

$291

 

$1,020

 

$784

Global

$3,154

 

$2,983

 

$9,356

 

$8,220

               

Restaurant Openings

             

U.S. - Total / Net

27 / 6

 

27 / 12

 

69 / 20

 

73 / 22

International - Total / Net

21 / 19

 

6 / (4)

 

60 / 43

 

23 / 4

Global - Total / Net

48 / 25

 

33 / 8

 

129 / 63

 

96 / 26

               

Global Reimaging Completion Percentage

       

70%

 

62%

               

(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.

(2) Excludes Venezuela and Argentina.

(3) Systemwide sales include sales at both Company-operated and franchise restaurants.

 

Financial Highlights

Third Quarter

 

Year-to-Date

                       
 

2021

 

2020

 

B / (W)

 

2021

 

2020

 

B / (W)

                       

(In Millions Except Per Share Amounts)

(Unaudited)

     

(Unaudited)

   
                       

Total Revenues

$

470.3

   

$

452.2

   

4.0

%

 

$

1,423.8

   

$

1,259.5

   

13.0

%

Adjusted Revenues(1)

$

372.3

   

$

367.5

   

1.3

%

 

$

1,134.1

   

$

1,018.0

   

11.4

%

Company-Operated Restaurant Margin

14.4%

   

16.9%

   

(2.5)

%

 

17.4%

   

13.9%

   

3.5%

 

General and Administrative Expense

$

62.8

   

$

47.3

   

(32.8)

%

 

$

178.6

   

$

147.6

   

(21.0)

%

Operating Profit

$

80.2

   

$

81.3

   

(1.4)

%

 

$

290.1

   

$

190.7

   

52.1

%

Net Income

$

41.2

   

$

39.8

   

3.6

%

 

$

148.3

   

$

79.1

   

87.5

%

Adjusted EBITDA

$

112.2

   

$

118.8

   

(5.6)

%

 

$

364.2

   

$

305.6

   

19.2

%

Reported Diluted Earnings Per Share

$

0.18

   

$

0.17

   

5.9

%

 

$

0.66

   

$

0.35

   

88.6

%

Adjusted Earnings Per Share

$

0.19

   

$

0.19

   

%

 

$

0.66

   

$

0.40

   

65.0

%

Cash Flows from Operations

           

$

276.7

   

$

205.8

   

34.5

%

Capital Expenditures

           

$

(43.4)

   

$

(44.9)

   

3.3

%

Free Cash Flow(2)

           

$

273.7

   

$

133.6

   

104.9

%

                       

(1) Total revenues less advertising funds revenue.

(2) Cash flows from operations minus capital expenditures, the impact of our advertising funds and cash paid for taxes related to the disposition
of the New York market in Q2 2021.

Third Quarter Financial Highlights

Total Revenues
The increase in revenues was primarily driven by higher franchise fees, as well as an increase in advertising funds and franchise royalty revenue, both of which were largely due to higher same-restaurant sales. The increase was partially offset by lower sales at Company-operated restaurants due to the sale of the Company's New York market during the second quarter of 2021.

Company-Operated Restaurant Margin
The decrease in Company-operated restaurant margin was primarily the result of labor rate increases, higher commodity costs, lower local advertising spend in the prior year, and customer count declines. These decreases were partially offset by a higher average check.

General and Administrative Expense
The increase in general and administrative expense was primarily driven by higher incentive and stock compensation accruals, technology costs primarily related to the Company's ERP implementation, and increased travel expenses.

Operating Profit
The decrease in operating profit resulted primarily from higher general and administrative expense, a decrease in Company-operated restaurant margin, and higher franchise support and other costs. These decreases were partially offset by higher franchise royalty revenue and fees.

Net Income
The increase in net income resulted primarily from lower interest expense as a result of the Company's debt refinancing completed in the second quarter of 2021. This was partially offset by a decrease in operating profit.

Adjusted EBITDA
The decrease in adjusted EBITDA resulted primarily from higher general and administrative expense, a decrease in Company-operated restaurant margin, and higher franchise support and other costs. These decreases were partially offset by higher franchise royalty revenue and fees.

Adjusted Earnings Per Share
Adjusted earnings per share was flat to the prior year driven by lower adjusted EBITDA offset by a decrease in interest expense and lower depreciation and amortization expense.

Year to Date Free Cash Flow
The increase in free cash flow resulted primarily from higher net income, the impact from the cash payment related to the settlement of the financial institutions case in January 2020, the timing of receipts of franchisee rental payments, and the timing of accrued compensation payments.

Company Declares Quarterly Dividend
The Company announced today the declaration of its regular quarterly cash dividend of 12 cents per share, payable on December 15, 2021, to shareholders of record as of December 1, 2021. The number of common shares outstanding as of November 3, 2021 was approximately 221 million.

Company Increases Share Repurchase Authorization by $80 Million; Announces $125 Million Accelerated Share Repurchase Program
The Company announced today that its Board of Directors has approved an increase to the Company's existing share repurchase authorization of $80 million to a total of $300 million. As part of this increased authorization, the Company intends to launch a $125 million accelerated share repurchase program in the fourth quarter of 2021.

The Company repurchased 1.9 million shares for $43.8 million in the third quarter of 2021 and has repurchased 0.7 million shares for $15.5 million thus far in the fourth quarter of 2021. As of the date of this release, approximately $125.1 million remains available under the Company's increased $300 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 fund revenues over advertising fund 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 Now Expects:

  • Global systemwide sales growth: 11 to 12 percent (excluding the impact of the 53rd week)
  • Adjusted EBITDA: $465 to $470 million
  • Adjusted earnings per share: $0.79 to $0.80
  • Cash flows from operations: $345 to $365 million
  • Capital expenditures: $75 to $85 million
  • Free cash flow: $270 to $280 million

Company to Host Virtual Investor Day on March 10, 2022 and Release Preliminary Fourth Quarter and Full-Year 2021 Results on February 10, 2022

The Company will host a virtual investor day on Thursday, March 10, 2022 where it plans to provide an update on its long-term strategic vision, re-introduce its long-term outlook, and issue its outlook for 2022. The event will be available to all interested parties via webcast from the Company's Investor Relations website.

In advance of its Investor Day, the Company plans to release its preliminary fourth quarter and full-year 2021 results on Thursday, February 10, 2022. The Company will host a conference call that same morning at 8:30 a.m. ET, with a simultaneous webcast from the Company's Investor Relations website.

Conference Call and Webcast Scheduled for 8:30 a.m. Today, November 10
The Company will host a conference call on Wednesday, November 10 at 8:30 a.m. ET, with a simultaneous webcast from the Company's Investor Relations website. 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 reorganization and realignment 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, the Company's ability to 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 factors that the Company currently deems immaterial may become material, 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 is 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 to the extent identified in the reconciliation tables that accompany this release, such as the cash paid for taxes related to the disposition of the New York market. The cash paid for taxes related to the disposition of the New York market is excluded from free cash flow because the cash we received on the sales of those restaurants is being recorded in cash flows from investing activities. 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 excluded the impact of a 53rd operating week. In fiscal 2020, same-restaurant sales compared 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.

 

The Wendy ' s Company and Subsidiaries

Condensed Consolidated Statements of Operations

Three and Nine Month Periods Ended October 3, 2021 and September 27, 2020

(In Thousands Except Per Share Amounts)

(Unaudited)

 

 

 

 

 

 

       
 

Three Months Ended

 

Nine Months Ended

 

2021

 

2020

 

2021

 

2020

Revenues:

             

Sales

$

171,078

   

$

191,946

   

$

553,660

   

$

522,961

 

Franchise royalty revenue

116,521

   

109,344

   

344,421

   

301,891

 

Franchise fees

22,234

   

7,476

   

53,825

   

19,754

 

Franchise rental income

62,446

   

58,721

   

182,190

   

173,434

 

Advertising funds revenue

97,976

   

84,755

   

289,699

   

241,468

 
 

470,255

   

452,242

   

1,423,795

   

1,259,508

 

Costs and expenses:

             

Cost of sales

146,436

   

159,545

   

457,440

   

450,170

 

Franchise support and other costs

10,509

   

5,960

   

27,080

   

19,427

 

Franchise rental expense

34,424

   

32,426

   

101,058

   

93,024

 

Advertising funds expense

108,529

   

92,048

   

310,642

   

253,353

 

General and administrative

62,840

   

47,322

   

178,576

   

147,553

 

Depreciation and amortization

30,940

   

32,966

   

93,243

   

98,726

 

System optimization gains, net

(1,437)

   

(23)

   

(32,719)

   

(2,333)

 

Reorganization and realignment costs

345

   

3,375

   

7,381

   

10,196

 

Impairment of long-lived assets

566

   

23

   

1,831

   

4,727

 

Other operating income, net

(3,092)

   

(2,748)

   

(10,800)

   

(6,076)

 
 

390,060

   

370,894

   

1,133,732

   

1,068,767

 

Operating profit

80,195

   

81,348

   

290,063

   

190,741

 

Interest expense, net

(26,000)

   

(29,086)

   

(82,990)

   

(86,696)

 

Loss on early extinguishment of debt

   

   

(17,917)

   

 

Other income, net

171

   

181

   

461

   

1,113

 

Income before income taxes

54,366

   

52,443

   

189,617

   

105,158

 

Provision for income taxes

(13,195)

   

(12,690)

   

(41,356)

   

(26,060)

 

Net income

$

41,171

   

$

39,753

   

$

148,261

   

$

79,098

 
               

Net income per share:

             

Basic

$

.19

   

$

.18

   

$

.67

   

$

.35

 

Diluted

.18

   

.17

   

.66

   

.35

 
               

Number of shares used to calculate basic income
per share

222,373

   

223,907

   

222,527

   

223,521

 
               

Number of shares used to calculate diluted income
per share

225,058

   

228,317

   

225,728

   

227,833

 

 

 

The Wendy ' s Company and Subsidiaries

Condensed Consolidated Balance Sheets

As of October 3, 2021 and January 3, 2021

(In Thousands Except Par Value)

(Unaudited)  

 

 

 

 

 

 

 
 

October 3,

 

2021

 

 

 

 

 

 

 

 

January 3,

 

2021

 

 

 

 

 

 

 

ASSETS

     

Current assets:

     

Cash and cash equivalents

$

571,502

   

$

306,989

 

Restricted cash

36,321

   

33,973

 

Accounts and notes receivable, net

100,265

   

109,891

 

Inventories

4,257

   

4,732

 

Prepaid expenses and other current assets

23,820

   

89,732

 

Advertising funds restricted assets

107,320

   

142,306

 

Total current assets

843,485

   

687,623

 

Properties

873,250

   

915,889

 

Finance lease assets

210,660

   

206,153

 

Operating lease assets

783,986

   

821,480

 

Goodwill

751,805

   

751,049

 

Other intangible assets

1,209,695

   

1,224,960

 

Investments

41,356

   

44,574

 

Net investment in sales-type and direct financing leases

305,242

   

268,221

 

Other assets

137,468

   

120,057

 

Total assets

$

5,156,947

   

$

5,040,006

 
       

LIABILITIES AND STOCKHOLDERS' EQUITY

     

Current liabilities:

     

Current portion of long-term debt

$

32,750

   

$

28,962

 

Current portion of finance lease liabilities

15,915

   

12,105

 

Current portion of operating lease liabilities

45,541

   

45,346

 

Accounts payable

26,506

   

31,063

 

Accrued expenses and other current liabilities

158,800

   

155,321

 

Advertising funds restricted liabilities

127,673

   

140,511

 

Total current liabilities

407,185

   

413,308

 

Long-term debt

2,360,763

   

2,218,163

 

Long-term finance lease liabilities

528,775

   

506,076

 

Long-term operating lease liabilities

830,488

   

865,325

 

Deferred income taxes

279,813

   

280,755

 

Deferred franchise fees

90,086

   

89,094

 

Other liabilities

117,083

   

117,689

 

Total liabilities

4,614,193

   

4,490,410

 

Commitments and contingencies

     

Stockholders' equity:

     

Common stock, $0.10 par value; 1,500,000 shares authorized; 470,424 shares
issued; 221,301 and 224,268 shares outstanding, respectively

47,042

   

47,042

 

Additional paid-in capital

2,911,552

   

2,899,276

 

Retained earnings

317,956

   

238,674

 

Common stock held in treasury, at cost; 249,123 and 246,156 shares, respectively

(2,685,063)

   

(2,585,755)

 

Accumulated other comprehensive loss

(48,733)

   

(49,641)

 

Total stockholders' equity

542,754

   

549,596

 

Total liabilities and stockholders' equity

$

5,156,947

   

$

5,040,006

 

 

 

The Wendy's Company and Subsidiaries

Condensed Consolidated Statements of Cash Flows

Nine Month Periods Ended October 3, 2021 and September 27, 2020

(In Thousands)

(Unaudited)

 

 

 

 

 

 

 
 

Nine Months Ended

 

2021

 

2020

Cash flows from operating activities:

     

Net income

$

148,261

   

$

79,098

 

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

     

Depreciation and amortization

93,243

   

98,726

 

Share-based compensation

16,735

   

15,112

 

Impairment of long-lived assets

1,831

   

4,727

 

Deferred income tax

(25)

   

5,878

 

Non-cash rental expense, net

28,421

   

19,967

 

Change in operating lease liabilities

(34,220)

   

(29,539)

 

Net receipt of deferred vendor incentives

1,906

   

5,061

 

System optimization gains, net

(32,719)

   

(2,333)

 

Distributions received from joint ventures, net of equity in earnings

3,561

   

1,187

 

Long-term debt-related activities, net

23,043

   

4,866

 

Changes in operating assets and liabilities and other, net

26,636

   

3,009

 

Net cash provided by operating activities

276,673

   

205,759

 

Cash flows from investing activities:

     

Capital expenditures

(43,401)

   

(44,876)

 

Acquisitions

4,879

   

 

Dispositions

52,657

   

3,570

 

Proceeds from sale of investments

   

169

 

Notes receivable, net

907

   

138

 

Net cash provided by (used in) investing activities

15,042

   

(40,999)

 

Cash flows from financing activities:

     

Proceeds from long-term debt

1,100,000

   

153,315

 

Repayments of long-term debt

(955,782)

   

(174,959)

 

Repayments of finance lease liabilities

(9,021)

   

(5,850)

 

Deferred financing costs

(20,873)

   

(2,122)

 

Repurchases of common stock

(125,656)

   

(46,667)

 

Dividends

(68,963)

   

(49,176)

 

Proceeds from stock option exercises

27,204

   

15,540

 

Payments related to tax withholding for share-based compensation

(4,390)

   

(5,409)

 

Net cash used in financing activities

(57,481)

   

(115,328)

 

Net cash provided by operations before effect of exchange rate changes on cash

234,234

   

49,432

 

Effect of exchange rate changes on cash

177

   

(1,715)

 

Net increase in cash, cash equivalents and restricted cash

234,411

   

47,717

 

Cash, cash equivalents and restricted cash at beginning of period

418,241

   

358,707

 

Cash, cash equivalents and restricted cash at end of period

$

652,652

   

$

406,424

 

 

 

The Wendy ' s Company and Subsidiaries

Reconciliations of Net Income to Adjusted EBITDA and Revenues to Adjusted Revenues

Three and Nine Month Periods Ended October 3, 2021 and September 27, 2020

(In Thousands)

(Unaudited)

 

 

 

 

 

 

       
 

Three Months Ended

 

Nine Months Ended

 

2021

 

2020

 

2021

 

2020

               

Net income

$

41,171

   

$

39,753

   

$

148,261

   

$

79,098

 

Provision for income taxes

13,195

   

12,690

   

41,356

   

26,060

 

Income before income taxes

54,366

   

52,443

   

189,617

   

105,158

 

Other income, net

(171)

   

(181)

   

(461)

   

(1,113)

 

Loss on early extinguishment of debt

   

   

17,917

   

 

Interest expense, net

26,000

   

29,086

   

82,990

   

86,696

 

Operating profit

80,195

   

81,348

   

290,063

   

190,741

 

Plus (less):

             

Advertising funds revenue

(97,976)

   

(84,755)

   

(289,699)

   

(241,468)

 

Advertising funds expense (a)

99,550

   

85,895

   

294,139

   

245,015

 

Depreciation and amortization

30,940

   

32,966

   

93,243

   

98,726

 

System optimization gains, net

(1,437)

   

(23)

   

(32,719)

   

(2,333)

 

Reorganization and realignment costs

345

   

3,375

   

7,381

   

10,196

 

Impairment of long-lived assets

566

   

23

   

1,831

   

4,727

 

Adjusted EBITDA

$

112,183

   

$

118,829

   

$

364,239

   

$

305,604

 
               

Revenues

$

470,255

   

$

452,242

   

$

1,423,795

   

$

1,259,508

 

Less:

             

Advertising funds revenue

(97,976)

   

(84,755)

   

(289,699)

   

(241,468)

 

Adjusted revenues

$

372,279

   

$

367,487

   

$

1,134,096

   

$

1,018,040

 
   

(a) 

Excludes advertising funds expense of $8,979 and $16,503 for the three and nine months ended October 3, 2021, respectively, and $6,153 and $8,338 for the three and nine months ended September 27, 2020, respectively, related to the Company's funding of incremental advertising.

 

 

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 Nine Month Periods Ended October 3, 2021 and September 27, 2020

(In Thousands Except Per Share Amounts)

(Unaudited)

 

 

 

 

 

 

       
 

Three Months Ended

 

Nine Months Ended

 

2021

 

2020

 

2021

 

2020

               

Net income

$

41,171

   

$

39,753

   

$

148,261

   

$

79,098

 

Plus (less):

             

Advertising funds revenue

(97,976)

   

(84,755)

   

(289,699)

   

(241,468)

 

Advertising funds expense (a)

99,550

   

85,895

   

294,139

   

245,015

 

System optimization gains, net

(1,437)

   

(23)

   

(32,719)

   

(2,333)

 

Reorganization and realignment costs

345

   

3,375

   

7,381

   

10,196

 

Impairment of long-lived assets

566

   

23

   

1,831

   

4,727

 

Loss on early extinguishment of debt

   

   

17,917

   

 

Total adjustments

1,048

   

4,515

   

(1,150)

   

16,137

 

Income tax impact on adjustments (b)

291

   

(868)

   

1,811

   

(4,566)

 

Total adjustments, net of income taxes

1,339

   

3,647

   

661

   

11,571

 
               

Adjusted income

$

42,510

   

$

43,400

   

$

148,922

   

$

90,669

 
               

Diluted earnings per share

$

.18

   

$

.17

   

$

.66

   

$

.35

 

Total adjustments per share, net of income taxes

.01

   

.02

   

   

.05

 

Adjusted earnings per share

$

.19

   

$

.19

   

$

.66

   

$

.40

 
   

(a)

Excludes advertising funds expense of $8,979 and $16,503 for the three and nine months ended October 3, 2021, respectively, and $6,153 and $8,338 for the three and nine months ended September 27, 2020, respectively, related to the Company's funding of incremental advertising.

(b)

The provision for (benefit from) income taxes on "System optimization gains, net" was $536 and $6 for the three months ended October 3, 2021 and September 27, 2020, respectively, and $8,802 and $(728) for the nine months ended October 3, 2021 and September 27, 2020, respectively.  The benefit from income taxes on all other adjustments (excluding the advertising funds adjustments) was calculated using an effective tax rate of 26.89% and 25.72% for the three months ended October 3, 2021 and September 27, 2020, respectively, and 25.77% and 25.72% for the nine months ended October 3, 2021 and September 27, 2020, respectively.

 

 

The Wendy ' s Company and Subsidiaries

Reconciliation of Net Cash Provided by Operating Activities to Free Cash Flow

Nine Month Periods Ended October 3, 2021 and September 27, 2020

(In Thousands)

(Unaudited)

 

 

 

 

 

 

   
 

Nine Months Ended

 

2021

 

2020

Net cash provided by operating activities

$

276,673

   

$

205,759

 

Plus (less):

     

Capital expenditures

(43,401)

   

(44,876)

 

Cash paid for taxes related to New York disposition

9,512

   

 

Advertising funds impact (a)

30,876

   

(27,297)

 

Free cash flow

$

273,660

   

$

133,586

 
   

(a)

Represents the net change in the restricted operating assets and liabilities of our advertising funds, which is included in "Changes in operating assets and liabilities and other, net," and the excess of advertising funds expense over advertising funds revenue, which is included in "Net income."

SOURCE Wendy's

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