Wendy's Company (the) · NASDAQ:WEN
Wendy's Company (the) — Wendy's/Arby's Group — Q4 2009 Earnings Presentation
51 slides from Wendy's Company (the)'s earnings presentation, Mar 4, 2010
Slide 1: Fourth Quarter and Full-Year 2009 Earnings Call
Fourth Quarter and Full-Year 2009 Earnings Call March 4, 2010
Slide 2: Opening Comments
Opening Comments John Barker SVP and Chief Communications Officer
Slide 3: Agenda
§ Business Highlights - Roland Smith − Fourth quarter − Full-year § Financial Results - Steve Hare − Fourth quarter consolidated financial overview − Full-year 2009 results − G&A synergies − Cash flow and debt capitalization − Dividend and stock repurchase program § 2010 Overview - - Steve Hare & Ro
Slide 4: Wendy's/Arby's Group Reported Today
Wendy’s/Arby’s Group Reported Today: § Fourth Quarter and Full-Year 2009 Results − Q4 − Full-year 2009 is not comparable to 2008 due to the merger § Balance Sheet Highlights § Adjusted EBITDA Compared to Pro-forma Adjusted EBITDA § Selected Financial Highlights for Each Brand § Form 10-K Fourth Quar
Slide 5: Forward-Looking Statements and Regulation G
Forward-Looking Statements and Regulation G This presentation, and certain information that management may discuss in connection with this presentation, may contain statements that are not historical facts, including, importantly, information concerning possible or assumed future results of our oper
Slide 6: Fourth Quarter and Full-Year 2009 Highlights
Fourth Quarter and Full-Year 2009 Highlights Roland Smith President & Chief Executive Officer
Slide 7: Key Accomplishments
§ Delivered Strong Earnings Growth – Adjusted EBITDA* increased 16% § Produced Margin Improvement at Wendy’s – 330 basis point improvement in company-operated stores – Ahead of schedule on improving Wendy’s restaurant margins by 500 basis points by end of 2011 § Achieved Cost Savings Ahead of Schedu
Slide 8: Q4 Business Overview
§ Adjusted EBITDA* Grew 39% to $103.3 Million, Including Effect of Additional Week in the Quarter § Strong Margin Improvement at Wendy’s − 420 basis points improvement in company-operated stores § Sales and Margins Declined at Arby’s − Expanded Everyday Value platform in Company units *See Appendix.
Slide 9: Wendy's 2009 Q4 Results
Wendy’s 2009 Q4 Results § North America Systemwide Same-Store Sales Declined 3% − SSS among strongest in the industry − Impacted by challenging economic trends and strong Q4 2008 SSS of +3.7% § 420 bps Margin Increase Driven by Operations, Pricing and Favorable Commodities * Excludes the effect (-1.
Slide 10: Wendy's Full-Year 2009 Results
Wendy’s Full-Year 2009 Results § North America Systemwide Same-Store Sales Declined 0.7% − Among the best in the industry during a challenging year § Strong Margin Increase of 330 bps Driven by Operations Improvements and Pricing with No Impact from Commodities * Excludes the effect (-1.4%) of fewer
Slide 11: Arby's 2009 Q4 Results
Arby’s 2009 Q4 Results § North America Systemwide Same-Store Sales Declined 11% − Impacted by significant competitor discounting and challenging economic trends § Margin Decreased Due to Sales Deleveraging * Restaurant Margin includes benefit of vacation policy standardization (150 bps)
Slide 12: Arby's Full-Year 2009 Results
Arby’s Full-Year 2009 Results * Restaurant Margin includes benefit of vacation policy standardization (40 bps) § North America Systemwide Same-Store Sales Declined 9% − Impacted by competitor discounting and lack of a value menu offering § Margins Decreased Driven by Deleveraging
Slide 13: Financial Overview
Financial Overview Steve Hare Chief Financial Officer
Slide 14: Q4 Consolidated Operating Results
Q4 Consolidated Operating Results
Slide 15: Q4 EBITDA and Adjusted EBITDA
*See Appendix. Q4 EBITDA and Adjusted EBITDA*
Slide 16: Consolidated Operating Results
Consolidated Operating Results
Slide 17: EBITDA and Adjusted EBITDA
*See Appendix. EBITDA and Adjusted EBITDA*
Slide 18: Adjusted EBITDA by Brand
Wendy’s Contributes Majority of Adjusted EBITDA Wendy’s 82% Arby’s 18% % of Consolidated Adjusted EBITDA *See Appendix. Adjusted EBITDA* by Brand
Slide 19: Achieved Targeted G&A Synergies Ahead of Schedule
Actual $62 million Plan $60 million Merger Achieved Targeted G&A Synergies Ahead of Schedule
Slide 20: Cash Flow
($ in Millions) Cash from operations Capital expenditures Net cash from operations Net financing proceeds Stock buybacks and dividends Sales of investments and other net Increase in cash Beginning cash Ending cash at January 3, 2010 $ $ W 2009 298.8 (101.9) 196.9 397.1 (100.9) 8.5 501.6 90.1 591.7 W
Slide 21: Debt Capitalization
(1) Adjusted EBITDA for 2008 is pro-forma. See appendix. Debt Capitalization
Slide 22: Recent Board Actions
§ Board Increased Stock Repurchase Authorization to $200 Million – Company purchased $120.2 million of common stock as of February 26, 2010 – 26.1 million shares for approximately $4.61 per share – Company may repurchase additional shares as market conditions warrant through January 2, 2011 § Quarte
Slide 23: Wendy's/Arby's Group
\ WENDY'S ARBY'S GROUP SERVING FRESH IDEAS DAILY.
Slide 24: Unemployment rate remains high at 9.7%
Unemployment rate remains high at 9.7% Source: Bureau of Labor Statistics. No job growth in the U.S.
Slide 25: Consumer confidence fell to a 10-month low
Consumer confidence fell 10 points to a 10-month low Consumer Confidence Continues to Run Below Healthy Economic Levels Source: The Conference Board Consumer Confidence Index
Slide 26: Consumers Continue to Pay Down Debt
Consumers Continue to Pay Down Debt Causing Less Consumer Spending Source: Federal Reserve Consumer Revolving Credit Outstanding: % Change vs. Year Ago
Slide 27: Financial Outlook 2010
§ Anticipate Weak Economic Conditions to Continue – High unemployment – Weak consumer confidence § Positive SSS at Wendy’s § Negative SSS at Arby’s, but Improving Year-over-Year § Total Capital Expenditure of $165 Million – Open 12 new Wendy’s – Remodel 100 Wendy’s and 100 Arby’s § Low-to-Mid Single
Slide 28: Brand Overview
Brand Overview Roland Smith President & Chief Executive Officer
Slide 29: Wendy's
\ WENDY'S ARBY'S GROUP SERVING FRESH IDEAS DAILY.
Slide 30: Wendy's Initiatives in 2010
§ Drive Positive Same-Store Sales – Balance premium and value – Continue product innovation – Reinforce “Real” brand positioning – Strategic pricing project § Continue Margin Improvement § Optimize New Purchasing Co-op § Re-Launch Breakfast Program and Expand to New Market § Execute Remodeling Progr
Slide 31: Wendy's 1st Quarter Calendar
Premium Cod Wendy’s 1st Quarter Calendar January February March 99¢
Slide 32: Wendy's Strategic Pricing
Wendy’s Strategic Pricing § Implementing a Strategic Pricing Initiative to Drive Same-Store Sales and Margins § History: – Wendy’s priced on a national basis – Over the past two years, moved to regional pricing § New strategy will price on a store-by-store basis – Expect benefit in 2011 and beyond
Slide 33: Wendy's Margin Improvement
330 bps 2009 § 2009: Goal was 160 to 180 bps Improvement Achieved 330 bps Improvement § 2010: Goal is to Continue Margin Expansion of 90 to 110 bps (excluding incremental breakfast investment) § 2011: Goal is a Total Increase of 500 bps to 16.6% 15.8%-16.0% Wendy’s Margin Improvement
Slide 34: Continue to Improve Wendy's Restaurant Operations
§ Steady Improvement in Operations – Number of “A” and “B” stores increased by 35 points Continue to Improve Wendy’s Restaurant Operations Q1 Q4
Slide 35: Optimize Wendy's New Purchasing Co-op
Optimize Wendy’s New Purchasing Co-op § Formed National Supply Chain Co-op in January 2010 § Co-op is Managing Food and Related Product Purchases as Well as Distribution Services § Offers Cost Savings Opportunities While Maintaining the Quality of the Wendy’s Brand
Slide 36: Introduce Wendy's New Breakfast Program and Expand
§ 2010 Plan: – Introduce new menu and program in 3 existing markets – Expand into additional company and franchise markets • $9 million incremental investment spend Introduce Wendy’s New Breakfast Program and Expand
Slide 37: Wendy's Remodeling Plan
§ 2009: 90 Remodels Complete § 2010: 100 Remodels Planned Curv e Tower Wendy’s Remodeling Plan
Slide 38: Arby's
\ WENDY'S ARBY'S GROUP SERVING FRESH IDEAS DAILY.
Slide 39: Arby's 2010 Initiatives
§ Recruit Experienced Brand President § Execute Turnaround Plan: – Expand value strategy – Increase media efficiency – Validate brand positioning – Improve advertising effectiveness – Revitalize product innovation – Launch a three-year remodeling program Arby’s 2010 Initiatives
Slide 40: Arby's Unique Selling Proposition
Arby’s Unique Selling Proposition § Quality Food Positioning § Unique, Slow-Roasted and Freshly Sliced Roast Beef Sandwiches § A Menu that’s an Alternative to Traditional Fast Food Arby’s Has One of the Highest Check Averages in QSR
Slide 41: Value is Arby's Biggest Issue
Arby’s Rated Lowest in “Worth What You Pay for It” Value is Arby’s Biggest Issue Source: Millward Brown, Brand Tracking Study; represents % of consumers who agree “Worth What You Pay for It”
Slide 42: Arby's Value Strategy
STARTING AT § National Advertising for $1 Value begins in April Arby’s - - Value Strategy
Slide 43: Arby's Media Efficiency and Advertising Effectiveness
Arby’s Media Efficiency and Advertising Effectiveness § Increase National Media Weight § Franchisees Approved National Media Rate Increase from 1.2% to 2.5% Effective April 1 § New Advertising Campaign begins in March § National Advertising on New Value Menu Starts in April
Slide 44: Launching Arby's Three-Year Remodel Program
§ 56% of Arby’s System is “Pinnacle” § Remodel Program – 3-Year Plan to Invest ($75-100M) – Goal is 75% as Pinnacle Image § 100 Remodels in 2010 Launching Arby’s Three-Year Remodel Program Pinnacle Remodel New Pinnacle
Slide 45: Wendy's/Arby's Group
\ WENDY'S ARBY'S GROUP SERVING FRESH IDEAS DAILY.
Slide 46: International Growth
§ 2009: – Contractual commitments for more than 300 new restaurants § 2010: – Targeting development agreements for approximately 400 restaurants • Expand existing markets • Enter 4 new countries • Identify a new partner for Japan – New openings • 35-45 new franchise units • First dual-branded unit o
Slide 47: Summary
§ Invest in Future Growth – Breakfast expansion – Remodeling – International § Drive Positive Same-Store Sales and Continue Margin Improvement at Wendy’s § Turnaround Arby’s and Improve Same-Store Sales § Continue to Identify G&A Efficiencies § Leverage Purchasing Power of Both Brands § Deliver Low-
Slide 48: Appendix
\ WENDY'S ARBY'S GROUP SERVING FRESH IDEAS DAILY.
Slide 49: Wendy's/Arby's Group
\ WENDY'S ARBY'S GROUP SERVING FRESH IDEAS DAILY.
Slide 50: Calculation and Comparison of EBITDA
WENDY'S ARBY'S GROUP Wendy's/Arby"s Group, Inc. and Subsidiaries Calcutation and Comparison of EBITDA and a Reconciliation of EBITDA to Net (Loss) Income (In Thousands) Fourth Quarters Years (Unaudited) 2009 2008 2008 ‘Pro-forma™ 2009 Ad weeks 13 weeks 53 weeks 52 weeks EBITDA $ 82,619 $6954 $384,35
Slide 51: Reconciliation of EBITDA to Adjusted EBITDA
Reconciliation of EBITDA to Adjusted EBITDA (In Thousands) (Unaudited) EBITDA Plus: Integration costs in goncral and administrative (G&A) ‘Wendy’s purchasing co-op start-up eostsin G&A Facilities relocation and corporate restructuring Bakery pension termination in cost of sales, Special committee ch