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Wendy’s/Arby’s Group Reports 2nd Quarter 2010 Results

2010-08-12

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Restaurant News Resource Wendy’s Introduces New Premium Salads Arby’sInternational Expansion Continues with New Development Agreements in Russia and Eastern Caribbean

Wendy’s/Arby’s Group, Inc. (NYSE: WEN), the third largest quick-service “During the second quarter, we achieved flat comparable transactions Roland Smith, President and Chief Executive Officer of Wendy’s/Arby’s Consolidated Second Quarter 2010 Summary

Adjusted EBITDA was $120.9 million, excluding pre-tax
Consolidated revenues were $877.0 million as compared to second
Net income was $10.7 million, or $0.03 per share, including net

Consolidated Year-to-Date 2010 Summary

Adjusted EBITDA was $212.9 million, excluding pre-tax
Consolidated revenues were $1.7 billion as compared to year-to-date
Net income was $7.3 million, or $0.02 per share, including net

Wendy’s Second Quarter 2010 Brand Summary

For the second quarter 2010, Wendy’s total revenue was $607.4 million

Wendy’s North America systemwide same-store sales decreased

Wendy’s North America company-operated same-store sales decreased 2.9%

Wendy’s company-operated restaurant margin was 16.4%, compared to “At Wendy’s, we were pleased to expand restaurant margins to 16.4%, “Our July North America company-operated same-store sales were soft Arby’s Second Quarter 2010 Brand Summary

For the second quarter 2010, Arby’s total revenue was $269.6 million

Arby’s North America systemwide same-store sales decreased

Arby’s North America company-operated same-store sales declined 8.8%

Arby’s company-operated restaurant margin was 13.4%, compared to 14.9% “During the second quarter, we achieved flat comparable transactions “Our July North America company-operated same-store sales were negative, Company Updates Financial Outlook

The Company updated its outlook and now anticipates 2010 adjusted EBITDA The updated 2010 EBITDA outlook includes the following annual

Flat same-store sales at Wendy’s North America company-operated

Improvement of 70 to 90 basis points in Wendy’s company-operated

Negative same-store sales at Arby’s North America company-operated

Capital expenditures of approximately $165 million, as expected. “Our adjusted EBITDA outlook for full-year 2010 reflects lower than Company Continues International Expansion in Russia and Eastern The Company recently announced a major restaurant development agreement Since the merger in September 2008, franchisees outside of North America “International expansion represents a major long-term growth opportunity

Logos, product and company names mentioned are the restaurant company in the United States, reported results for the second quarter ended July 4, 2010.

versus a year ago, which is very encouraging compared to trends over the past year”
Group, said: “We achieved 3.2% growth in adjusted EBITDA¹ in the second quarter, primarily due to the continued expansion of Wendy’s® company-operated restaurant margin and by significantly reducing G&A expense. We generated this growth despite ongoing challenges in the U.S. economy, particularly the high unemployment rate. We continue to invest in our long-term growth opportunities including Wendy’s breakfast program, remodeling restaurants at both Arby’s® and Wendy’s, and international development.”
integration-related costs totaling $0.9 million, and increased 3.2% as compared to second quarter 2009 of $117.2 million, excluding pre-tax integration-related costs of $7.3 million.

quarter 2009 revenues of $912.7 million. after-tax special charges of $15.2 million, or $0.03 per share. Second quarter 2009 net income was $14.9 million, or $0.03 per share, including after-tax special charges of $12.4 million, or $0.03 per share. integration-related costs and non-recurring charges of $8.7 million, and increased 7.8% as compared to 2009 year-to-date adjusted EBITDA of $197.5 million, excluding pre-tax integration-related costs of $15.1 million. 2009 revenues of $1.8 billion. after-tax special charges of $27.3 million, or $0.06 per share as compared to year-to-date 2009 net income of $4.0 million, or $0.01 per share, including after-tax special charges of $27.4 million, or $0.06 per share. compared to revenue of $615.2 million in the second quarter a year ago, a year-over-year decrease of $7.8 million due primarily to the decline in company same-store sales.

1.7%. and Wendy’s North America franchise same-store sales decreased 1.4%. 15.9% in the second quarter 2009, an increase of 50 basis points. This year-over-year improvement was offset in part by sales deleveraging as well as unfavorable commodity costs. despite soft same-store sales and a 90 basis point increase in commodity costs. Second quarter same-store sales were impacted by the weak economic environment and continued aggressive value promotions by QSR competitors,” said Smith. “Looking ahead, we are excited about our new lineup of premium salads, which feature high quality, fresh ingredients and all-natural dressings, as well as other new products in the pipeline.
early in the month as we lapped the successful introduction of Boneless Wings a year ago. Sales improved significantly since the start of national advertising for our new salads on July 19, and we anticipate our third quarter same-store sales will be positive at Wendy’s,” said Smith. “Later this year, we will return to value messaging with new product offerings.”
compared to $297.5 million in the second quarter a year ago, a decrease of $27.9 million, which was primarily due to declines in same-store sales and 18 fewer company-operated restaurants.

7.4%. and North America franchise same-store sales declined 6.7%. in the second quarter 2009. The year-over-year difference was due to sales deleveraging and unfavorable commodity costs, partially offset by advertising costs that were deferred until the second half of the year. versus a year ago, which is very encouraging compared to trends over the past year,” said Smith. “It will take some time to turn same-store sales positive, particularly in this tough economic climate. In July, we enhanced our value proposition with the introduction of our new $1 Junior Deluxe Roast Beef sandwich supported by national media.
but improved significantly after we started national advertising for our new $1 value menu sandwich on July 19, and we generated positive transactions over the last two weeks of the period. While we anticipate Arby’s same-store sales will remain negative for the quarter, we expect sequential improvement over the previous quarter,” said Smith. “We continue to make progress on our key priorities at Arby’s, under the leadership of our new President Hala Moddelmog, including increasing our media efficiency and advertising effectiveness. We are also revitalizing product innovation, executing on our three-year remodel program, and validating and reintroducing our brand positioning to the consumer.”
to decline approximately 3% to 5%, as compared to 2009 adjusted EBITDA of $411.6 million normalized for the effect of the 53^rd week (2009 net income was $5.1 million). The revised outlook for adjusted EBITDA excludes the incremental advertising of approximately $8 million to support the expansion of Wendy’s new breakfast program later this year to additional company and franchise markets.
expectations:

restaurants. restaurant margin excluding the effect of the incremental breakfast advertising and the 53^rd week. restaurants, but improving on a year-over-year basis. anticipated sales at each brand due to the challenging economic environment,” said Smith. “We are reviewing our 2011 outlook and plan to provide an update later this year.”
Caribbean
with Wenrus Restaurant Group Limited for the Russian Federation. The agreement calls for the development of 180 dual-branded Wendy’s and Arby’s restaurants over the next 10 years. The Company also recently announced signing an agreement for the development of 24 Wendy’s restaurants over the next 10 years in Trinidad and Tobago and eight other markets in the Eastern Caribbean.
have opened 45 new restaurants and the Company has signed development agreements for more than 400 restaurants over the next 10 years.
for Wendy’s/Arby’s Group and we continue to invest resources to realize this potential,” said Smith. “We’ve made significant development progress over the past year in the Middle East, Singapore, Turkey and Russia, and we anticipate additional development agreements in other international markets.”