The Wendy’s Company Reports Preliminary Fourth-Quarter and Full-Year 2011 Results

The Wendy’s Company (NASDAQ: WEN) reported preliminary, unaudited results for the fourth quarter and full year ended Jan. 1, 2012. The Company also issued its 2012 and long-term outlook. The Company plans to release its audited 2011 results on March 1.

“We are making progress on re-establishing Wendy’s as the quality leader and innovator in QSR with our ‘Recipe to Win,’”

Emil Brolick, President and Chief Executive Officer said, “In the fourth quarter, we produced our strongest same-store sales growth since the second quarter of 2004 primarily due to the introduction of our premium Dave’s Hot ‘N Juicy™ cheeseburger line, which received a positive response from consumers. For 2011, we also generated positive transactions for the first year since 2002. Adjusted EBITDA¹ was $331.1 million for fiscal 2011, and income from continuing operations for the year was $17.9 million.

“We expect another positive year in 2012, with same-store sales growth in a range of 2 to 3 percent,” Brolick said. “We estimate 2012 Adjusted EBITDA will be in a range of $335 million to $345 million.”

Preliminary Fourth Quarter 2011 Summary

• Consolidated revenues were $615.0 million in the fourth quarter of 2011, an increase of 5.6 percent compared to $582.6 million in the fourth quarter of 2010.
• Adjusted EBITDA was $80.9 million in the fourth quarter of 2011, an increase of 10.5 percent compared to fourth-quarter 2010 Adjusted EBITDA of $73.2 million.
• Fourth-quarter 2011 income from continuing operations was $4.3 million. This compares to fourth-quarter 2010 income from continuing operations of $6.1 million.
• Adjusted Earnings Per Share¹ was $0.04 in the fourth quarter of fiscal 2011 compared to fourth quarter 2010 Adjusted Earnings Per Share of $0.03. Earnings per share was $0.01 in the fourth quarter of fiscal 2011 and in the fourth quarter of 2010.
• Wendy’s® North America systemwide same-store sales increased 4.4 percent.
• Wendy’s North America company-operated restaurants same-store sales increased 5.1 percent, resulting from increases in average check and transactions.
• Wendy’s North America franchise same-store sales increased 4.2 percent.
• Wendy’s company-operated restaurant margin increased 100 basis points to 15.0 percent. The year-over-year improvement was primarily due to sales leverage from increased pricing and transactions and favorable insurance adjustments more than offsetting a 170 basis-point negative impact from commodity cost increases.

Preliminary 2011 Summary

• Consolidated revenues were $2.431 billion in fiscal 2011, a 2.4 percent increase compared to $2.375 billion in fiscal 2010.
• Adjusted EBITDA was $331.1 million in fiscal 2011 compared to 2010 Adjusted EBITDA of $341.9 million.
• Fiscal 2011 income from continuing operations was $17.9 million. This compares to 2010 income from continuing operations of $18.1 million.
• Adjusted Earnings Per Share was $0.15 in fiscal 2011 compared to 2010 Adjusted Earnings Per Share of $0.17. Earnings per share was $0.04 in fiscal 2011 and fiscal 2010.
• Wendy’s North America company-operated restaurants same-store sales increased 2.0 percent, resulting from increases in average check and transactions.
• Wendy’s company-operated restaurant margin decreased 80 basis points to 14.0 percent. The year-over-year decrease was primarily due to the negative impact from commodity cost increases of 140 basis points, partially offset by sales leverage from pricing and transactions gains, as well as favorable insurance adjustments.

“We are making progress on re-establishing Wendy’s as the quality leader and innovator in QSR with our ‘Recipe to Win,’” Brolick said. “Our recent introductions such as Dave’s Hot ‘N Juicy cheeseburger line and Asiago Ranch Chicken Club Sandwiches have been outstanding, and our goal is to continue to build a menu that is relevant to consumers and drives profitable sales growth. As part of our remodel effort – which we call ‘Image Activation’ – we are working to enhance the entire customer experience, including the restaurant design, inside environment, elevated food preparation standards and higher customer service standards.”

Company Issues 2012 and Long-Term Outlook

The Company issued its outlook for Adjusted EBITDA of $335 million to $345 million for fiscal 2012. The outlook reflects continuing operations and excludes items such as relocation costs and other expenses related to the consolidation of the Atlanta restaurant support center with the Dublin, Ohio restaurant support center, which the Company estimates to be approximately $23 million.

“We expect a low-single-digit increase in our Adjusted EBITDA growth rate for 2012,” Chief Financial Officer Steve Hare said. “In terms of growth beyond 2012, we are targeting an average annual Adjusted EBITDA growth rate in the high-single-digit to low-double-digit range. We also expect our Adjusted Earnings Per Share growth rate, on average, to be higher than our Adjusted EBITDA growth rate.”

The Company’s 2012 outlook includes the following expectations:

• Same-store sales growth of approximately 2.0 to 3.0 percent at Wendy’s North America company-operated restaurants.
• Wendy’s company-operated restaurant margin of 14.0 to 14.5 percent, an increase of up to 50 basis points. This assumes the benefit of same-store sales increases offset by increased commodity costs of 115 to 145 basis points, driven primarily by rising beef costs.
• Capital expenditures for the Wendy’s brand of approximately $225 million, an increase of $78 million compared to $147 million in 2011. This estimate includes “Image Activation” designs at 20 new and 50 remodeled Company-operated restaurants in North America. The capital expenditures estimate also includes an upgrade of restaurant point-of-sale technology.
• Unit development of approximately 40 new franchise restaurants, plus approximately 55 new international franchise and joint-venture restaurants.

Stock Repurchase

In the fourth quarter of 2011, the Company repurchased approximately 1.1 million shares of common stock at an average price of $4.43 per share. The number of shares outstanding at the end of the fourth quarter was approximately 390 million. For the full year, the Company repurchased approximately 31.0 million shares of common stock for $157.0 million at an average price of $5.07 per share.

Since the Board of Directors authorized a stock repurchase program in 2009, the Company has repurchased approximately 83.3 million shares of common stock for $402.5 million, at an average price of $4.83 per share. The authorization for the repurchase program expired at the end of fiscal 2011.

“The focus of our capital management strategy will be investment in core business growth opportunities; however, we will continue to evaluate share repurchases based on market conditions and other factors,” Hare said.

Arby’s Sale and Transition Services Agreement

On July 4, 2011, the Company completed the sale of Arby’s Restaurant Group, Inc., on the terms previously announced to a buyer formed by Roark Capital Group. All transition services were complete by the end of fiscal 2011. Due to the sale, the Company has presented Arby’s fiscal 2011 results as discontinued operations.

The Company incurred costs related to the sale of Arby’s in 2011, including changes in certain executive positions, severance costs for other employees, implementation of an employee retention program and bonus costs. In addition, the Company announced plans to close its Atlanta restaurant support center in late 2012 and consolidate it with its Dublin, Ohio restaurant support center. The total transaction-related and other costs of these actions totaled $45.7 million in 2011.

The benefits from the Arby’s sale and consolidation of restaurant support centers include a reduction in debt and related capital spending requirements, cash tax savings and the elimination of Arby’s operating losses (which include general and administrative costs).

Preliminary Nature of Reported Results

The fourth-quarter and full-year 2011 financial results reported in this news release are preliminary and unaudited. The Company expects to announce final results when it files its Annual Report on Form 10-K for the year ended Jan. 1, 2012, on or about March 1, 2012. Final results could differ from the preliminary results reported in this news release. The Company assumes no obligation and does not intend to update these preliminary results prior to filing its Annual Report on Form 10-K for the year ended Jan. 1, 2012.

About The Wendy’s Company

The Wendy's Company is the world's third largest quick-service hamburger company. The Wendy's system includes more than 6,500 franchise and Company restaurants in the United States and 27 countries and U.S. territories worldwide. For more information, visit aboutwendys.com or wendys.com.

¹ Earnings per share and Adjusted Earnings Per Share references in this release reflect earnings per share from continuing operations and Adjusted Earnings Per Share from continuing operations. See reconciliation of Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) and Adjusted Earnings Per Share, which are non-GAAP financial measures, to GAAP results, below.

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