Wendy’s International, Inc. issues financial outlook for 2007, 2008 and 2009
Progress with comprehensive strategic plan – “Quality-Driven: Wendy’s Recipe for Success” – accelerates timeline for financial improvement
Company projects EBITDA of $330 to $340 million in 2007, $390 to $410 million in 2008 and $425 to $460 million in 2009
Company expects earnings per share of $1.17 to $1.23 and same-store sales increases of 3% to 4% in 2007
January 2007 same-store sales trending at 4.5% to 5%; eighth consecutive positive month of same-store sales
Company to raise annual dividend rate 47%, from $0.34 per share to $0.50 per share, beginning with May payment
DUBLIN, Ohio – (February 5, 2007) – Wendy’s International, Inc. (NYSE: WEN) today provided key financial projections for 2007, 2008 and 2009.
The Company reaffirmed its previously issued estimate of $330 to $340 million in earnings before interest, taxes, depreciation and amortization (EBITDA) in 2007. The Company also said it expects to generate EBITDA of $390 to $410 million in 2008 due to improvements resulting from its initiatives related to its comprehensive strategic plan, “Quality-Driven: Wendy’s Recipe for Success,” which emphasizes the Company’s outstanding hamburger brand and quality position in QSR. In 2009, the Company is projecting EBITDA of $425 to $460 million. On February 2, the Company announced that its 2006 adjusted EBITDA from continuing operations was $220.7 million. (See “Disclosure regarding non-GAAP financial measures.”)
“The new strategic plan is already paying dividends, as it has enabled us to accelerate our timeline for operational improvements,” said Chief Executive Officer and President Kerrii Anderson. “We have realized eight consecutive months of positive same-store sales, including January, which is trending at 4.5% to 5%, due to strong marketing, Wendy's new Deluxe Value Meals and gift card redemptions,” Anderson said. “We have also enhanced our new product pipeline and have significantly reduced costs in 2006 to establish a platform for future improvement. We intend to build on this momentum and leave no stone unturned, as we continue to review every element of our business and drive significant improvement in 2007 and beyond.
“These anticipated improvements in our core business give us the confidence to commit to returning capital to our shareholders, including a 47% increase in our annual dividend rate, from $0.34 per share to $0.50 per share, beginning with our May dividend payment.”
Management driving improvement through comprehensive strategic plan
The Company is seeing measurable results from its strategic plan, and management is confident about generating improved results in 2007.
The components of the plan include:
- Revitalize Wendy’s brand – The Company has re-established its brand essence, “Quality Made Fresh,” centered on Wendy’s core strength, its hamburger business.
- Streamline and improve operations – Wendy’s believes it can significantly improve operations attributes such as Order Accuracy, Friendliness, Cleanliness, and Speed of Service, clearly positioning the Company as the best operator in QSR and resulting in significantly improved store-level profits.
- Reclaim innovation leadership – The Company expects to introduce more than 10 new products during 2007, including exciting sandwiches and salads, as well as beverages that are unique to Wendy’s.
- Strengthen franchisee commitments – Management is focused on driving sales and improving profitability across the entire system and is providing incentives to franchisees to re-invest in existing restaurants. Capture new opportunities – Wendy’s will seek to drive growth beyond its existing business, including expanding its breakfast program to 20% to 30% of its system in 2007 and more than half the system in 2008.
- Embrace a performance-driven culture – Wendy’s has redesigned its incentive compensation plan by creating a more direct link between Company performance and individual pay.
“We have aggressive plans in place to revitalize the Wendy’s brand, and we expect our 2007, 2008 and 2009 results to be significantly improved compared to 2006,” Anderson said. “Our management team is focused on performance and execution, and we are excited to usher in this new era at Wendy’s.”
Company reaffirms EBITDA estimate of $330 to $340 in 2007
The Company reaffirmed its previously issued estimate of $330 to $340 in EBITDA in 2007. The 2007 estimate incorporates the following:
- Annual revenue growth of approximately 5% to 6%
- Same-store sales growth in a range of 3% to 4%
- A 390-to-410 basis-point improvement in store operations EBITDA margins in a range of 12.8% to 13.0% in 2007 from a base of 8.9% in 2006 by the end of the year
- Tight control of G&A and other overhead costs, in the range of 8.75% to 9.25% of revenue
- The sale of up to 50 restaurants to franchisees
- Opportunistic purchase of franchise restaurants
- North American restaurant development goals as follows:
2007 Outlook |
Company |
Franchise |
Openings |
15-30 |
50-60 |
Closings |
(15-30) |
(50-60) |
Total Net Stores |
0 |
0 |
- A steady expansion of a breakfast offering, with a goal of reaching breakeven in the day-part during the year
- Slightly lower beef costs relative to 2006, with slightly higher prices for chicken and higher prices for produce
- Operating income of $215 million to $225 million
- An effective tax rate of approximately 39.0%
- Opportunistic share repurchases roughly offsetting dilution
- Earnings per share of $1.17 to $1.23
- The investment of up to $110 million into the renovation of Wendy’s company-owned and franchised restaurants during the year
- No impact from currency
Company expects to produce EBITDA of $390 to $410 million in 2008
The Company expects to generate significantly improved year-over-year results in 2008 due to operational improvements enabled by its strategic plan. The Company expects to deliver EBITDA of $390 to $410 million for the year, compared to its estimate of $330 to $340 million in 2007. The Company had previously announced that it expected to achieve EBITDA of $400 to $410 million in 2009.
The 2008 estimate incorporates the following:
- Operating income of $275 to $295 million
- A full-year benefit from store-level operating margin improvements implemented during 2007
- A strategic plan that has been implemented and a strong core business that is demonstrating continuous improvement
- A powerful marketing calendar and a full new product pipeline
- Tight control of G&A and other overhead costs
- Continued expansion of the Company’s breakfast program, which is expected to be profitable
Company expects to produce EBITDA of $425 to $460 million in 2009
The Company expects to deliver operating income of $310 to $345 million and EBITDA of $425 to $460 million for the year, compared to its estimate of $390 to $410 million in 2008.
Disclosure regarding non-GAAP financial measures
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.
Below is a reconciliation of 2006 reported operating income to 2006 EBITDA and 2006 adjusted EBITDA:
2006 reported operating income $ 40.3 million
2006 depreciation and amortization $123.7 million
2006 EBITDA from continuing ops $164.0 million
2006 restructuring charges $ 38.9 million
2006 incremental advertising expense $ 25.0 million
2006 joint venture impact1 $ (7.2 million)
2006 adjusted EBITDA from continuing ops $220.7 million
1With the spinoff of Tim Hortons, the Company will lose 50% of the income from its 50/50 joint venture with Tim Hortons.
Below are reconciliations of 2007, 2008 and 2009 operating income to EBITDA:
2007 estimated operating income: $215 million to $225 million
2007 estimated depreciation and amortization: $115 million
2007 estimated EBITDA: $330 million to $340 million
2008 estimated operating income: $275 million to $295 million
2008 estimated depreciation and amortization: $115 million
2008 estimated EBITDA: $390 million to $410 million
2009 estimated operating income: $310 million to $345 million
2009 estimated depreciation and amortization: $115 million
2009 estimated EBITDA: $425 million to $460 million
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.
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