In the news release, Wendy's International, Inc. Announces 2008 First Quarter Results, issued earlier today by Wendy's International, Inc. (NYSE: WEN) over PR Newswire, we are advised by the company that there is additional information that should be included after the Income and EPS Reconciliations section. Below is the "Important Information" section that has been updated:
Important Information: While Wendy's does not believe that this communication constitutes solicitation material in respect of its solicitation of proxies in connection with its 2008 Annual Shareholders Meeting, this communication may be deemed to be solicitation material. Wendy's plans to file with the Securities and Exchange Commission (the "SEC") and mail to its shareholders a Proxy Statement in connection with its 2008 Annual Meeting and advises its security holders to read the Proxy Statement when it becomes available because it will contain important information. Security holders may obtain free copies of the Proxy Statement and other relevant documents (when available) that Wendy's files with the SEC at the SEC's website at http://www.sec.gov. The Proxy Statement and these other documents may also be obtained free from Wendy's by directing a request to its Investor Relations Department.
Wendy's and its directors and named executive officers may be deemed to be
participants in the solicitation of proxies from Wendy's security holders in
connection with its 2008 Annual Meeting. Security holders may obtain
information regarding the names, affiliations and interests of these
individuals in Wendy's most recent Annual Report on Form 10-K, and in its
proxy statement filed with the SEC on
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Wendy's International, Inc. Announces 2008 First Quarter Results
- Continuing operations net income was $4.1 million and EBITDA were $42.8 million
- Continuing operations adjusted income was $8.4 million and adjusted EBITDA were $49.7 million
Company Focused on Quality and Innovation in Challenging Operating Environment
Including 2008 pre-tax expenses related to the Board of Director's Special
Committee of
- Income from continuing operations of $4.1 million, compared to $14.5 million for the first quarter of 2007; - Diluted earnings per share (EPS) from continuing operations of $0.05, compared to $0.15 per share for the first quarter of 2007; and - Earnings before interest, taxes, depreciation and amortization (EBITDA) from continuing operations of $42.8 million, compared to $57.0 million for the first quarter of 2007.
The Company did not incur any Special Committee expense in the first quarter of 2007.
Excluding 2008 expenses related to the Board's Special Committee and restructuring charges and excluding 2007 restructuring charges, the Company reported for the first quarter of 2008:
- Adjusted income from continuing operations of $8.4 million, compared to $15.1 million for the first quarter of 2007; - Adjusted diluted EPS from continuing operations of $0.10, compared to $0.16 per share for the first quarter of 2007; and - Adjusted EBITDA from continuing operations of $49.7 million, compared to $58.0 million for the first quarter of 2007. Including expenses Excluding expenses(i) 1Q 2008 1Q 2007 1Q 2008 1Q 2007 Income from continuing operations $4.1 million $14.5 million $8.4 million $15.1 million Diluted EPS from continuing operations $0.05 $0.15 $0.10 $0.16 EBITDA from continuing operations $42.8 million $57.0 million $49.7 million $58.0 million (i) See reconciliations below. Adjusted income from continuing operations, EBITDA and EPS excludes expenses related to the Board's Special Committee and restructuring charges.
There were several unusual items affecting the comparability of 2008
first-quarter adjusted results to a year ago, including higher 2008 breakfast
investments of
Commenting on the quarter, Chief Executive Officer and President
"After a very challenging January, same-store sales were better in February and March. April same-store sales, which benefit from the Easter holiday shift, are running positive month to date," said Anderson. "We continue to highlight Wendy's(R) quality value offerings, as our consumers feel the pressures of a weakened economy, record-high gasoline prices and soaring food costs."
Due to the uncertainties resulting from the economy, commodities and the Board's Special Committee process, the Company does not plan to provide detailed earnings guidance for 2008 and beyond.
2008 1st Quarter Financial Highlights - U.S. company-operated restaurant EBITDA margins were 8.1% in the first quarter of 2008, compared to 9.2% in the first quarter of 2007. The year-over-year difference is due primarily to higher breakfast costs, lower-than-expected sales and higher commodity costs, partially offset by labor efficiency and menu price increases. - Total company-operated restaurant EBITDA margins were 7.6% in the first quarter of 2008, compared to 8.6% one year ago. - As previously announced, first-quarter same-store sales at U.S. franchise-operated restaurants decreased 0.1%, compared to an increase of 3.7% in the first quarter of 2007. First-quarter same-store sales at U.S. company-operated restaurants decreased 1.6%, compared to an increase of 3.8% in the first quarter of 2007. Sales trends improved in February and March compared to January, as sales rolled over the strongest quarter of the previous year. - The Company faced a calendar shift in 2008 with the Easter holiday falling in the first quarter (March 21-23), as opposed to the second quarter a year ago. This negatively impacted same-store sales at company restaurants by an estimated 0.3% during the quarter. First- quarter sales also were impacted by the severe winter weather in March in the Midwest and North. - The total number of system-wide Wendy's restaurants as of March 30, 2008, was 6,622, compared to 6,658 as of the end of the same quarter a year ago.
Company focused on quality, innovation and operations excellence
The Company recently introduced its high-quality Chicken Go Wrap, featuring center-cut, chicken breast fillets - available Grilled, Spicy or Homestyle. In addition, Wendy's is offering for a limited-time its popular Southwest Chicken Caesar Salad.
"New product introductions such as our Chicken Go Wrap are expected to drive customer traffic and strengthen our focus on quality," Anderson said.
"Our enhanced strategic plan - 'Doing What's Right for Our Customers' - leverages our strong history of quality and innovation and focuses on attracting new and important customer segments with value, beverage, snack and core sandwich strategies," said Anderson.
The Company previously announced that
The Company's search for a permanent Chief Marketing Officer is ongoing.
In February,
Board approves 121st consecutive quarterly dividend
The Board of Directors approved a quarterly dividend of
Company will not hold its 2008 first-quarter conference call
The previously announced first quarter conference call and webcast which
was scheduled for
Safe Harbor statement
Certain information in this news release, particularly information regarding future economic performance and finances, and plans, expectations and objectives of management, is forward looking. Factors set forth in our Safe Harbor under the Private Securities Litigation Reform Act of 1995, in addition to other possible factors not listed, could affect the Company's actual results and cause such results to differ materially from those expressed in forward-looking statements.
Please review the Company's Safe Harbor statement at http://www.wendys-invest.com/safeharbor.
Wendy's International, Inc. overview
Wendy's International, Inc. is one of the world's largest and most successful restaurant operating and franchising companies. More information about the Company is available at www.wendys-invest.com.
Appendix
1st Quarter Financial and Income Statement Information
The Company's first-quarter 2008 reported results from continuing operations include the impact of:
- Cost of sales - $319.8 million, or 62.3% of retail sales, in the first quarter of 2008, compared to $324.1 million, or 62.0% of retail sales, in the first quarter of 2007. The year-over-year difference is due primarily to a decline in sales, breakfast sales at lower margins and increased commodity costs, partially offset by labor efficiency and menu price increases. - Company restaurant operating costs - $151.2 million, or 29.5% of sales, in the first quarter of 2008, compared to $152.4 million, or 29.1% of sales, in the first quarter of 2007. The year-over-year difference as a percent of sales is due to lower sales. - Operating costs - $6.8 million in the first quarter of 2008, compared to $3.9 million in the first quarter of 2007. The year-over-year increase is due primarily to incremental franchisee incentives of $1.3 million during the quarter and breakfast advertising costs to support franchisees of $1.0 million during the quarter. Spending to support franchisee breakfast advertising began in the second half of 2007. - General and administrative expense - $53.2 million, or 9.1% of revenue, in the first quarter of 2008, compared to $50.8 million, or 8.6% of revenue, in the first quarter of 2007. The year-over-year difference includes higher professional and legal fees of $1.8 million, higher salaries and benefits of $1.2 million, 2008 convention expenses of $0.6 million as well as other higher expenses. Also, 2008 includes lower bonus accruals of $3.8 million. - Restructuring costs - $0.2 million in the first quarter of 2008. This compares to $1.0 million in restructuring costs in the first quarter of 2007. - Special Committee related charges - $6.7 million in the first quarter of 2008 in expenses related to the Board's Special Committee. Wendy's Chairman Jim Pickett announced the formation of the Special Committee on April 26, 2007. The Company did not incur any Special Committee expense in the first quarter of 2007. - Other income/expense - $1.5 million of expense in the first quarter of 2008, compared to $1.3 million of expense in the first quarter of 2007, including lower 2008 gains on asset dispositions of $0.5 million and lower 2008 store closure charges of $0.5 million. - Interest - Interest expense of $9.1 million in the first quarter of 2008, compared to $12.2 million a year ago. The year-over-year decrease reflects the pay down of the debt associated with the sale of approximately 40% of the 2007 U.S. royalty stream. Interest income of $2.1 million in the first quarter of 2008, compared to $5.4 million a year ago, reflects lower cash balances as well as a decrease in interest rates. - Taxes - The Company's first-quarter tax rate was a higher-than-expected 40.5%. This compares to 33.5% in the first quarter of 2007 which benefited from non recurring refund claims. - Shares outstanding - A lower share count of 88.3 million average diluted shares in the first quarter of 2008, compared to 95.7 million average diluted shares in the first quarter of 2007. The Company repurchased 9.0 million shares in an accelerated share repurchase in the first quarter of 2007. First-Quarter Average Same-Store Sales Summary 1Q 2008 1Q 2007 U.S. Company -1.6% 3.8% U.S. Franchise -0.1% 3.7% Monthly Average Same-Store Sales Summary for January, February and March Jan 2008 Jan 2007 Feb 2008 Feb 2007 Mar 2008 Mar 2007 U.S. Company -3.8% 4.8% 0.4% 3.3% -0.8% 3.6% U.S. Franchise -2.1% 4.7% 2.3% 2.7% 0.1% 3.7%
Discontinued operations
During the third quarter of 2007, the Company completed the sale of Cafe Express. Accordingly, the after-tax operating results of Cafe Express appear in the "Discontinued Operations" line on the income statement.
Disclosure regarding non-GAAP financial measures The Company uses adjusted income and adjusted EPS from continuing operations as internal measures of operating performance. Management believes adjusted income and adjusted EPS from continuing operations provide a meaningful perspective of the underlying operating performance of the business. EBITDA is used by management as a performance measure for benchmarking against its peers and competitors. The Company believes EBITDA is useful to investors because it is frequently used by securities analysts, investors and other interested parties to evaluate companies in the restaurant industry. EBITDA is not a recognized term under GAAP.
The Company also uses adjusted EBITDA, which accounts for certain items unrelated to ongoing operations, as an internal measure of business operating performance. Management believes adjusted EBITDA provides a meaningful perspective of the underlying operating performance of the business.
Company EBITDA margins from continuing operations consist of operating income plus depreciation and amortization divided by revenue.
Company-operated restaurant EBITDA margins consist of sales from company- operated restaurants minus cost of sales from company-operated restaurants minus company restaurant operating costs divided by sales from company- operated restaurants.
EBITDA and Adjusted EBITDA Reconciliations
The following are reconciliations of 2008 and 2007 first-quarter reported operating income to first-quarter EBITDA from continuing operations and adjusted EBITDA: 1st Quarter 1st Quarter 2008 2007 ---- ---- Reported operating income $ 13.9 million $ 28.6 million Depreciation and amortization $ 28.9 million $ 28.4 million ----------------------------- ---------------- --------------- EBITDA from continuing ops $ 42.8 million $ 57.0 million Restructuring charges $ 0.2 million $ 1.0 million Special Committee expenses $ 6.7 million -- ----------------------------- ---------------- --------------- Adjusted EBITDA from continuing ops $ 49.7 million $ 58.0 million ================ =============== Income and EPS Reconciliations The following are reconciliations of 2008 and 2007 first-quarter income from continuing operations to first-quarter adjusted income from continuing operations: 1st Quarter 1st Quarter 2008 2007 ---- ---- Income from continuing operations $ 4.1 million $ 14.5 million Restructuring charges, net of tax (1) $ 0.1 million $ 0.6 million Special Committee expenses, net of tax (1) $ 4.2 million -- --------------------------------- ---------------- --------------- Adjusted income from continuing ops $ 8.4 million $ 15.1 million ================================= ================ =============== Diluted shares 88.3 million 95.7 million Adjusted diluted EPS from continuing ops $ 0.10 $ 0.16 (1) After tax amounts are computed using a tax rate of 38%. WENDY'S INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (In thousands, except per share data) (Unaudited) First Quarter Ended 03/30/2008 04/01/2007 $ Change % Change --------- --------- -------- ------- REVENUES Sales $513,017 $522,944 ($9,927) -1.9% Franchise revenues 69,174 67,220 1,954 2.9% --------- --------- --------- ------- TOTAL REVENUES 582,191 590,164 (7,973) -1.4% --------- --------- --------- ------- COSTS & EXPENSES Cost of sales 319,830 324,061 (4,231) -1.3% Company restaurant operating costs 151,244 152,388 (1,144) -0.8% Operating costs 6,844 3,935 2,909 73.9% Depreciation of property & equipment 28,806 28,052 754 2.7% General & administrative expenses 53,236 50,822 2,414 4.7% Restructuring and special committee related charges 6,863 1,031 5,832 565.7% Other expense (income), net 1,454 1,318 136 10.3% --------- --------- --------- ------- TOTAL COSTS & EXPENSES 568,277 561,607 6,670 1.2% --------- --------- --------- ------- OPERATING INCOME 13,914 28,557 (14,643) -51.3% Interest expense (9,107) (12,207) 3,100 25.4% Interest income 2,154 5,416 (3,262) -60.2% --------- --------- --------- ------- INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES 6,961 21,766 (14,805) -68.0% INCOME TAXES 2,818 7,285 (4,467) -61.3% --------- --------- --------- ------- INCOME from continuing operations $4,143 $14,481 ($10,338) -71.4% INCOME from discontinued operations $0 $206 (206) -100.0% --------- --------- --------- ------- NET INCOME $4,143 $14,687 ($10,544) -71.8% ========= ========= ========= ======= Diluted earnings per common share from continuing operations $0.05 $0.15 ($0.10) -68.7% ========= ========= ========= ======= Diluted earnings per common share from discontinued operations $0.00 $0.00 $0.00 0.0% ========= ========= ========= ======= Total diluted earnings per common share $0.05 $0.15 ($0.10) -68.7% ========= ========= ========= ======= Diluted shares 88,284 95,706 (7,422) -7.8% ========= ========= ========= ======= WENDY'S INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS March 30, December 30, 2008 2007 ---------- ---------- (Unaudited) (Dollars in thousands) ASSETS Current assets Cash and cash equivalents $207,562 $211,200 Accounts receivable, net 62,525 72,069 Deferred income taxes 6,701 7,304 Inventories and other 27,123 29,590 Advertising fund restricted assets 41,251 42,665 Assets held for disposition 4,031 3,338 ---------- ---------- 349,193 366,166 ---------- ---------- Property and equipment 2,120,661 2,119,140 Accumulated depreciation (886,088) (872,255) ---------- ---------- 1,234,573 1,246,885 ---------- ---------- Goodwill 84,479 84,001 Deferred income taxes 4,788 4,899 Intangible assets, net 2,616 2,704 Other assets 83,299 84,742 ---------- ---------- $1,758,948 $1,789,397 ========== ========== WENDY'S INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS March 30, December 30, 2008 2007 ---------- ---------- (Unaudited) (Dollars in thousands) LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Accounts payable $75,407 $85,662 Accrued expenses: Salaries and wages 24,972 39,157 Taxes 30,758 31,033 Insurance 60,037 57,190 Other 67,032 45,612 Advertising fund restricted liabilities 40,559 35,760 Current portion of long-term obligations 1,687 26,591 ---------- ---------- 300,452 321,005 ---------- ---------- Long-term obligations Term debt 521,385 521,343 Capital leases 21,830 21,680 ---------- ---------- 543,215 543,023 ---------- ---------- Deferred income taxes 43,047 45,351 Other long-term liabilities 75,702 75,887 Commitments and contingencies Shareholders' equity Preferred stock, Authorized: 250,000 shares Common stock, $.10 stated value per share, Authorized: 200,000,000 shares, Issued: 130,259,000 and 130,241,000 shares, respectively 13,026 13,024 Capital in excess of stated value 1,114,095 1,110,363 Retained earnings 1,281,081 1,287,963 Accumulated other comprehensive income (expense): Cumulative translation adjustments and other 24,063 28,949 Pension liability (18,555) (18,990) ---------- ---------- 2,413,710 2,421,309 Treasury stock, at cost: 42,844,000 and 42,844,000 shares, respectively (1,617,178) (1,617,178) ---------- ---------- 796,532 804,131 ---------- ---------- $1,758,948 $1,789,397 ========== ========== WENDY'S INTERNATIONAL, INC. AND SUBSIDIARIES SYSTEMWIDE RESTAURANTS Increase/ Increase/ As of As of (Decrease) As of (Decrease) March 30, December 30, From Prior April 1, From Prior 2008 2007 Quarter 2007 Year ------------------------------------------------------- Wendy's U.S. Company 1,267 1,274 (7) 1,308 (41) Franchise 4,650 4,662 (12) 4,641 9 ------------------------------------------------------- 5,917 5,936 (19) 5,949 (32) Canada Company 140 140 0 145 (5) Franchise 237 236 1 231 6 ------------------------------------------------------- 377 376 1 376 1 Other International Company 0 0 0 2 (2) Franchise 328 333 (5) 331 (3) ------------------------------------------------------- 328 333 (5) 333 (5) Total Wendy's Company 1,407 1,414 (7) 1,455 (48) Franchise 5,215 5,231 (16) 5,203 12 ------------------------------------------------------- 6,622 6,645 (23) 6,658 (36) ======================================================= WENDY'S INTERNATIONAL, INC. Income Statement Definitions Sales Includes sales from company operated restaurants. Also included are sales of kids' meal toys and the sales to franchisees from Wendy's bun baking facilities. Franchise Revenues Consists primarily of royalties, rental income, gains from the sales of properties to franchisees and franchise fees. Franchise fees include charges for various costs and expenses related to establishing a franchisee's business. Cost of Sales Includes food, paper and labor costs for restaurants. Also included are the cost of kids' meal toys and cost of goods sold to franchisees from Wendy's bun baking facilities. Company Restaurant Consists of all costs necessary to manage and Operating Costs operate restaurants, except cost of sales and depreciation. These include advertising, insurance, maintenance, rent, etc., as well as support costs for personnel directly related to restaurant operations. Operating Costs Includes rent expense related to properties leased to franchisees and other franchisee related costs such as remodel incentives. Also includes costs to operate and maintain Wendy's bun baking facilities. General and Administrative Costs that cannot be directly related to Expenses generating revenue. Restructuring and Special Includes restructuring costs and costs Committee Related Charges related to the Special Committee of the Board of Directors, which was formed to explore strategic alternatives for the Company. Other Income and Expense Includes expenses (income) that are not directly derived from the Company's primary businesses. This includes income from the Company's investments in joint ventures and other minority investments. Expenses include store closures, other asset write-offs, and sales of properties to non-franchisees. Income from Discontinued Reflects net income from Cafe Express. Operations
SOURCE Wendy's International, Inc.