WEN
$19.95
Wendys
$.16
.81%
Earnings Details
2nd Quarter June 2019
Wednesday, August 7, 2019 7:00:00 AM
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Summary

Wendys Reports In-line

Wendys (WEN) reported 2nd Quarter June 2019 earnings of $0.18 per share on revenue of $435.3 million. The consensus earnings estimate was $0.17 per share on revenue of $441.0 million. The Earnings Whisper number was $0.18 per share. Revenue grew 5.9% on a year-over-year basis.

The company said it continues to expect 2019 earnings of $0.61 to $0.63 per share. The current consensus earnings estimate is $0.63 per share for the year ending December 31, 2019.

Wendy' Co franchises and operates company-owned Wendy’s quick-service restaurants specializing in hamburger sandwiches throughout North America.

Results
Reported Earnings
$0.18
Earnings Whisper
$0.18
Consensus Estimate
$0.17
Reported Revenue
$435.3 Mil
Revenue Estimate
$441.0 Mil
Growth
Earnings Growth
Revenue Growth
Power Rating
Grade
Earnings Release

The Wendy's Company Reports Second Quarter 2019 Results

DUBLIN, Ohio, Aug. 7, 2019 /PRNewswire/ -- The Wendy's Company (Nasdaq: WEN) today reported unaudited results for the second quarter ended June 30, 2019.

The Wendy's Company is the world's third-largest quick-service hamburger company. The Wendy's system includes approximately 6,500 franchise and Company-operated restaurants in the United States and 28 countries and U.S. territories worldwide. For more information, visit www.aboutwendys.com . (PRNewsFoto/The Wendy's Company)

"We delivered another quarter of strong earnings growth and are pleased with our continued progress to build an even stronger foundation for the Wendy's® brand," President and Chief Executive Officer Todd Penegor said. "We are executing on our plan to accelerate same-restaurant sales in North America and drive global restaurant expansion, fueled by a healthy restaurant economic model Our relentless focus on bringing every element of The Wendy's Way to life by providing food our customers love, friendly service, value, and an inviting atmosphere will continue to drive growth in the future."

Second Quarter 2019 Summary

See "Disclosure Regarding Non-GAAP Financial Measures" and the reconciliation tables that accompany this release for a discussion and reconciliation of certain non-GAAP financial measures included in this release.

Operational Highlights

Second Quarter

Year-to-Date


2019


2018

2019


2018


(Unaudited)

(Unaudited)








Systemwide Sales Growth (1)







North America

3.0%


2.7%

3.0%


2.7%

International(2)

10.4%


12.8%

10.2%


13.2%

Global

3.3%


3.1%

3.3%


3.2%








North America Same-Restaurant Sales Growth (1)

1.4%


1.9%

1.4%


1.8%








Restaurant Openings







North America - Total / Net

20 / 3


25 / 13

49 / 8


41 / 4

International - Total / Net

8 / 6


11 / 10

22 / 0


28 / 18

Global - Total / Net

28 / 9


36 / 23

71 / 8


69 / 22








Systemwide Sales (In US$ Millions) (3)







North America

$2,664


$2,602

$5,122


$5,006

International(2)

$140


$132

$273


$259

Global

$2,804


$2,734

$5,395


$5,265









 

(1) Systemwide sales growth and same-restaurant sales growth are calculated on a constant currency basis and include sales by both Company-operated and franchise restaurants.

(2) Excludes Venezuela, and beginning in the third quarter of 2018, Argentina.

(3) Systemwide sales include sales at both Company-operated and franchise restaurants.

 

Financial Highlights

Second Quarter


Year-to-Date


2019


2018


B / (W)


2019


2018


B / (W)

(In Millions Except Per Share Amounts)

(Unaudited)




(Unaudited)















Total Revenues

$

435.3



$

411.0



5.9

%


$

843.9



$

791.6



6.6

%

Adjusted Revenues(1)

$

348.7



$

326.4



6.8

%


$

676.8



$

628.1



7.8

%

Company-Operated Restaurant Margin

16.5

%


17.4

%


(0.9)

%


15.8

%


15.8

%


%

General and Administrative Expense

$

50.8



$

49.2



(3.3)

%


$

100.1



$

99.5



(0.6)

%

Operating Profit

$

80.6



$

71.5



12.7

%


$

146.8



$

126.7



15.9

%

Net Income

$

32.4



$

29.9



8.4

%


$

64.3



$

50.0



28.6

%

Adjusted EBITDA

$

117.8



$

109.5



7.6

%


$

219.5



$

200.4



9.5

%

Reported Diluted Earnings Per Share

$

0.14



$

0.12



16.7

%


$

0.27



$

0.20



35.0

%

Adjusted Earnings Per Share

$

0.18



$

0.14



28.6

%


$

0.32



$

0.25



28.0

%

Cash Flows from Operations







$

154.1



$

148.4



3.8

%

Capital Expenditures







$

(25.5)



$

(23.9)



6.7

%

Free Cash Flow(2)







$

125.3



$

117.8



6.4

%













(1) Total revenues less advertising funds revenue.

(2) Cash flows from operations minus capital expenditures and the impact of our advertising funds.

Second Quarter Financial Highlights

Revenues and Adjusted Revenues

The increase in revenues and adjusted revenues was primarily driven by higher sales at Company-operated restaurants and an increase in franchise royalty revenue.  Higher sales at Company-operated restaurants was the result of an increase in the number of restaurants in operation and positive same-restaurant sales.  The increase in franchise royalty revenue was primarily driven by positive same-restaurant sales and new restaurant development.  Revenues and adjusted revenues also benefited from an increase in franchise rental income which was driven by approximately $10 million in pass-through payments related to subleases as the result of the new lease accounting standard.

Company-Operated Restaurant Margin

The decrease in Company-operated restaurant margin was primarily the result of labor rate inflation, customer count declines, and higher commodity costs, partially offset by pricing actions.

General and Administrative Expense

The increase in general and administrative expenses was primarily due to the timing of employee compensation expenses and investments in resources to support our Digital Experience and International organizations, partially offset by lower employee compensation and related expenses as a result of the Company's G&A savings initiative.

Operating Profit

The increase in operating profit resulted primarily from an increase in franchise royalty revenue and an increase in net franchise rental income.

Net Income

The increase in net income resulted primarily from an increase in operating profit, partially offset by a loss on early extinguishment of debt that the Company incurred as part of its debt refinancing in the second quarter of 2019.

Adjusted EBITDA

The increase in adjusted EBITDA resulted primarily from an increase in franchise royalty revenue and net franchise rental income.

Adjusted Earnings Per Share

The increase in adjusted earnings per share resulted primarily from an increase in adjusted EBITDA, fewer shares outstanding as a result of the Company's share repurchase programs and lower depreciation expense.

Free Cash Flow

The increase in free cash flow resulted primarily from an increase in cash flows from operations, driven primarily by an increase in net income.

New Restaurant Development

In the second quarter of 2019 the Company had 28 global restaurant openings, and an increase of 9 net new restaurants.  The Company continues to expect 2019 global net new restaurant growth of approximately 1.5 percent.

Image Activation

Image Activation, which includes reimaging existing restaurants and building new restaurants, remains an integral part of our global growth strategy. At the end of the second quarter of 2019, approximately 53 percent of the global system was image activated.  This compares to approximately 50 percent image activated at the end of 2018.

Company Repurchases 1.1 Million Shares for $20.4 Million in Second Quarter

The Company repurchased 1.1 million shares for $20.4 million in the second quarter at an average price of $18.86 per share and has repurchased 0.5 million shares for $10.0 million in the third quarter to date.  The Company currently has $186.8 million remaining on its existing $225 million share repurchase authorization that expires on March 1, 2020.

2019 Outlook

This release includes forward-looking guidance for certain non-GAAP financial measures, including systemwide sales, adjusted EBITDA, adjusted earnings per share, adjusted tax rate and free cash flow. The Company excludes certain expenses and benefits from adjusted EBITDA, adjusted earnings per share, free cash flow and adjusted tax rate, such as advertising funds revenues and expenses, impairment of long-lived assets, reorganization and realignment costs, system optimization (gains) losses, net, loss on early extinguishment of debt, timing and resolution of certain tax matters, and the impact of the proposed settlement of the Financial Institutions case. Due to the uncertainty and variability of the nature and amount of those expenses and benefits, the Company is unable without unreasonable effort to provide projections of net income, earnings per share, or reported tax rate or a reconciliation of those projected measures.

During 2019, the Company Continues to Expect:

  • Global systemwide sales growth of approximately 3.0 to 4.0 percent.
  • General and administrative expense of approximately $195 million.
  • Adjusted EBITDA growth of approximately 2.5 to 4.5 percent.
  • Adjusted tax rate of approximately 22 to 23 percent.
  • Adjusted earnings per share growth of approximately 3.5 to 7.0 percent.
  • Cash flows from operations of approximately $305 to $320 million*.
  • Capital expenditures of approximately $75 to $80 million.
  • Free cash flow of approximately $230 to $240 million, approximately flat to up 4.0 percent compared to 2018*.

* The Company now expects the impact of the proposed settlement of the Financial Institutions case to take place in early 2020 as opposed to late 2019.

Company on Track to Achieve 2020 Goals:

  • Global systemwide sales of approximately $11.5 billion.
  • Free cash flow of approximately $275 million, excluding the approximately $20 million tax-effected impact from the proposed settlement of the Financial Institutions case, which is now expected to take place in early 2020. Including the impact of the proposed settlement, the Company expects free cash flow of approximately $255 million.

Conference Call and Webcast Scheduled for 8:30 a.m. Today, August 7

The Company will host a conference call on Wednesday, August 7 at 8:30 a.m. ET, with a simultaneous webcast from the Company's Investor Relations website at www.irwendys.com.  The related presentation materials will also be available on the Company's Investor Relations website. The live conference call will be available by telephone at (877) 572-6014 for domestic callers and (281) 913-8524 for international callers. An archived webcast and presentation materials will be available on the Company's Investor Relations website.

Company to Host Investor Day on October 10, 2019 in Dublin, Ohio

The Company will host an investor day on Thursday, October 10, 2019 in Dublin, Ohio where it plans to provide an overview of its long-term strategic vision and issue additional long-term guidance. Due to limited capacity, attendance at the 2019 investor day will be by invitation only.  The event will be available to all interested parties via live webcast from the Company's Investor Relations website at www.irwendys.com.

Forward-looking Statements

This release contains certain statements that are not historical facts, including, most importantly, information concerning possible or assumed future results of operations of The Wendy's Company and its subsidiaries (collectively, the "Company"). Those statements, as well as statements preceded by, followed by, or that include the words "may," "believes," "plans," "expects," "anticipates," or the negation thereof, or similar expressions, constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 (the "Reform Act"). All statements that address future operating, financial or business performance; strategies, initiatives or expectations; future synergies, efficiencies or overhead savings; anticipated costs or charges; future capitalization; and anticipated financial impacts of recent or pending transactions are forward-looking statements within the meaning of the Reform Act. The forward-looking statements are based on the Company's expectations at the time such statements are made, speak only as of the dates they are made and are susceptible to a number of risks, uncertainties and other factors. The Company's actual results, performance and achievements may differ materially from any future results, performance or achievements expressed in or implied by the forward-looking statements. For all forward-looking statements, the Company claims the protection of the safe harbor for forward-looking statements contained in the Reform Act.

Many important factors could affect the Company's future results and could cause those results to differ materially from those expressed in or implied by the forward-looking statements contained herein. Such factors, all of which are difficult or impossible to predict accurately, and many of which are beyond the Company's control, include, but are not limited to, the following: (1) competition, including pricing pressures, couponing, aggressive marketing and the potential impact of competitors' new unit openings on sales of Wendy's restaurants; (2) consumers' perceptions of the relative quality, variety, affordability and value of the food products the Company offers, and changes in consumer tastes and preferences; (3) food safety events, including instances of food-borne illness (such as salmonella or E. coli) involving Wendy's or its supply chain; (4) consumer concerns over nutritional aspects of beef, chicken, french fries or other products the Company sells, the ingredients in the Company's products and/or the cooking processes used in the Company's restaurants; (5) conditions beyond the Company's control, such as weather, natural disasters, disease outbreaks, epidemics or pandemics impacting the Company's customers or food supplies, or acts of war or terrorism; (6) the effects of negative publicity that can occur from increased use of social media; (7) success of operating and marketing initiatives, including advertising and promotional efforts and new product and concept development by the Company and its competitors; (8) prevailing economic, market and business conditions affecting the Company including competition from other food service providers, unemployment and decreased consumer spending levels, particularly in geographic regions that contain a high concentration of Wendy's restaurants; (9) changes in the quick-service restaurant industry, spending patterns and demographic trends, such as consumer trends toward value-oriented products and promotions or toward consuming fewer meals away from home; (10) certain factors affecting the Company's franchisees, including the business and financial viability of franchisees, the timely payment of franchisees' obligations due to the Company or to national or local advertising organizations, and the ability of franchisees to open new restaurants and reimage existing restaurants in accordance with their development and franchise commitments, including their ability to finance restaurant development and reimages; (11) increased labor costs due to competition or increased minimum wage or employee benefit costs; (12) changes in commodity costs (including beef, chicken, pork, cheese and grains), labor, supplies, fuel, utilities, distribution and other operating costs; (13) the availability of suitable locations and terms for restaurant development by the Company and its franchisees; (14) development costs, including real estate and construction costs; (15) delays in opening new restaurants or completing reimages of existing restaurants, including risks associated with the Company's Image Activation program; (16) the ability to effectively manage the acquisition and disposition of restaurants or successfully implement other strategic initiatives; (17) anticipated or unanticipated restaurant closures by the Company and its franchisees; (18) the Company's ability to identify, attract and retain franchisees with sufficient experience and financial resources to develop and operate Wendy's restaurants successfully; (19) availability of qualified restaurant personnel to the Company and its franchisees, and the ability to retain such personnel; (20) the Company's ability, if necessary, to secure alternative distribution of supplies of food, equipment and other products to Wendy's restaurants at competitive rates and in adequate amounts, and the potential financial impact of any interruptions in such distribution; (21) availability and cost of insurance; (22) availability, terms (including changes in interest rates) and deployment of capital, and changes in debt, equity and securities markets; (23) changes in, and the Company's ability to comply with, legal, regulatory or similar requirements, including franchising laws, payment card industry rules, overtime rules, minimum wage rates, wage and hour laws, tax legislation, federal ethanol policy and accounting standards, policies and practices; (24) the costs, uncertainties and other effects of legal, environmental and administrative proceedings; (25) the effects of charges for impairment of goodwill or for the impairment of other long-lived assets; (26) risks associated with failures, interruptions or security breaches of the Company's computer systems or technology, or the occurrence of cyber incidents or a deficiency in cybersecurity that impacts the Company or its franchisees, including the cybersecurity incident described in the Company's Annual Report on Form 10-K filed with the SEC on February 27, 2019 (the "Form 10-K"); (27) the difficulty in predicting the ultimate costs that will be incurred in connection with the Company's plan to reduce general and administrative expense, and the future impact on its earnings; (28) risks associated with the Company's securitized financing facility and other debt agreements, including the ability to generate sufficient cash flow to meet increased debt service obligations, compliance with operational and financial covenants, and restrictions on the Company's ability to raise additional capital; (29) risks associated with the amount and timing of share repurchases under share repurchase programs approved by the Company's Board of Directors; (30) risks associated with the proposed settlement of the Financial Institutions case described in the Form 10-K, including the timing and amount of payments; (31) risks associated with the Company's digital commerce strategy, platforms and technologies, including the Company's ability to adapt to changes in industry trends and consumer preferences; (32) risks associated with the Company's evolving organizational and leadership structure; and (33) other factors cited in the Company's releases, public statements and/or filings with the Securities and Exchange Commission, including those identified in the "Risk Factors" sections of the Company's Forms 10-K and 10-Q.

The Company's franchisees are independent third parties that the Company does not control.  Numerous factors beyond the control of the Company and its franchisees may affect new restaurant openings. Accordingly, there can be no assurance that commitments under development agreements with franchisees will result in new restaurant openings. In addition, numerous factors beyond the control of the Company and its franchisees may affect franchisees' ability to reimage existing restaurants in accordance with the Company's expectations.

All future written and oral forward-looking statements attributable to the Company or any person acting on its behalf are expressly qualified in their entirety by the cautionary statements contained or referred to above. New risks and uncertainties arise from time to time, and it is impossible for the Company to predict these events or how they may affect the Company.

The Company assumes no obligation to update any forward-looking statements after the date of this release as a result of new information, future events or developments, except as required by federal securities laws. The Company does not endorse any projections regarding future performance that may be made by third parties.

Disclosure Regarding non-GAAP Financial Measures

In addition to the financial measures presented in this release in accordance with U.S. Generally Accepted Accounting Principles ("GAAP"), the Company has included certain non-GAAP financial measures in this release, including adjusted revenue, adjusted EBITDA, adjusted earnings per share, adjusted tax rate, free cash flow and systemwide sales.  Adjusted revenue, adjusted EBITDA, adjusted earnings per share and adjusted tax rate exclude certain expenses and benefits as detailed in the reconciliation tables that accompany this release.  The Company uses these non-GAAP financial measures as internal measures of business operating performance and as performance measures for benchmarking against the Company's peers and competitors.  Adjusted EBITDA, adjusted earnings per share and systemwide sales are also used by the Company in establishing performance goals for purposes of executive compensation.

The Company believes its presentation of adjusted revenue, adjusted EBITDA, adjusted earnings per share, adjusted tax rate and systemwide sales provides a meaningful perspective of the underlying operating performance of our current business and enables investors to better understand and evaluate our historical and prospective operating performance.  The Company believes these non-GAAP financial measures are important supplemental measures of operating performance because they eliminate items that vary from period to period without correlation to our core operating performance and highlight trends in our business that may not otherwise be apparent when relying solely on GAAP financial measures.  Due to the nature and/or size of the items being excluded, such items do not reflect future gains, losses, expenses or benefits and are not indicative of our future operating performance.  The Company believes investors, analysts and other interested parties use adjusted revenue, adjusted EBITDA, adjusted earnings per share, adjusted tax rate and systemwide sales in evaluating issuers, and the presentation of these measures facilitates a comparative assessment of the Company's operating performance in addition to the Company's performance based on GAAP results.

This release also includes disclosure and guidance regarding the Company's free cash flow.  Free cash flow is a non-GAAP financial measure that is used by the Company as an internal measure of liquidity.   As a result of the adoption of the new revenue recognition accounting standard in the first quarter of 2018, the Company now defines free cash flow as cash flows from operations minus (i) capital expenditures and (ii) the net change in the restricted operating assets and liabilities of the advertising funds and any excess/deficit of advertising funds revenue over advertising funds expense included in net income, as reported under GAAP.  The impact of our advertising funds is excluded because the funds are used solely for advertising and are not available for the Company's working capital needs. The Company believes free cash flow is an important liquidity measure for investors and other interested persons because it communicates how much cash flow is available for working capital needs or to be used for repurchasing shares, paying dividends, repaying or refinancing debt, financing possible acquisitions or investments or other uses of cash.  Free cash flow is also used by the Company in establishing performance goals for purposes of executive compensation.

Adjusted revenue, adjusted EBITDA, adjusted earnings per share, adjusted tax rate, free cash flow and systemwide sales are not recognized terms under GAAP, and the Company's presentation of these non-GAAP financial measures does not replace the presentation of the Company's financial results in accordance with GAAP.  Because all companies do not calculate adjusted revenue, adjusted EBITDA, adjusted earnings per share, adjusted tax rate, free cash flow and systemwide sales (and similarly titled financial measures) in the same way, those measures as used by other companies may not be consistent with the way the Company calculates such measures.  The non-GAAP financial measures included in this release should not be construed as substitutes for or better indicators of the Company's performance than the most directly comparable GAAP financial measures.

Key Business Measures

The Company tracks its results of operations and manages its business using certain key business measures, including same-restaurant sales, systemwide sales and Company-operated restaurant margin, which are measures commonly used in the quick-service restaurant industry that are important to understanding Company performance.

Same-restaurant sales and systemwide sales each include sales by both Company-operated and franchise restaurants. The Company reports same-restaurant sales for new restaurants after they have been open for 15 continuous months and for reimaged restaurants as soon as they reopen.

Franchise restaurant sales are reported by our franchisees and represent their revenues from sales at franchised Wendy's restaurants.  Sales by franchise restaurants are not recorded as Company revenues and are not included in the Company's consolidated financial statements. However, the Company's royalty revenues are computed as percentages of sales made by Wendy's franchisees and, as a result, sales by franchisees have a direct effect on the Company's royalty revenues and profitability.

Same-restaurant sales and systemwide sales exclude sales from Venezuela and, beginning in the third quarter of 2018, Argentina due to the highly inflationary economies of those countries.

The Company calculates same-restaurant sales and systemwide sales growth on a constant currency basis. Constant currency results exclude the impact of foreign currency translation and are derived by translating current year results at prior year average exchange rates. The Company believes excluding the impact of foreign currency translation provides better year over year comparability.

Company-operated restaurant margin is defined as sales from Company-operated restaurants less cost of sales divided by sales from Company-operated restaurants. Cost of sales includes food and paper, restaurant labor and occupancy, advertising and other operating costs.

About Wendy's

Wendy's® was founded in 1969 by Dave Thomas in Columbus, Ohio. Dave built his business on the premise, "Quality is our Recipe®," which remains the guidepost of the Wendy's system. Wendy's is best known for its made-to-order square hamburgers, using fresh, never frozen beef*, freshly-prepared salads with hand-chopped lettuce, and other signature items like chili, baked potatoes and the Frosty® dessert. The Wendy's Company (Nasdaq: WEN) is committed to doing the right thing and making a positive difference in the lives of others. This is most visible through the Company's support of the Dave Thomas Foundation for Adoption® and its signature Wendy's Wonderful Kids® program, which seeks to find every child in the North American foster care system a loving, forever home. Today, Wendy's and its franchisees employ hundreds of thousands of people across more than 6,700 restaurants worldwide with a vision of becoming the world's most thriving and beloved restaurant brand. For details on franchising, connect with us at www.wendys.com/franchising. Visit www.wendys.com and www.squaredealblog.com for more information and connect with us on Twitter and Instagram using @wendys, and on Facebook at www.facebook.com/wendys.

*Fresh beef available in the contiguous U.S., Alaska, and Canada.

Investor Contact :
Greg Lemenchick
Director - Investor Relations
(614) 766-3977; greg.lemenchick@wendys.com

Media Contact :
Heidi Schauer
Senior Director - Corporate Communications & Customer Care
(614) 764-3368; heidi.schauer@wendys.com


The Wendy's Company and Subsidiaries
Condensed Consolidated Statements of Operations
Three and Six Month Periods Ended June 30, 2019 and July 1, 2018
(In Thousands Except Per Share Amounts)
(Unaudited)






Three Months Ended


Six Months Ended


2019


2018


2019


2018

Revenues:








Sales

$

181,050



$

167,344



$

348,747



$

320,993


Franchise royalty revenue and fees

109,125



107,559



211,078



205,467


Franchise rental income

58,561



51,529



117,013



101,636


Advertising funds revenue

86,612



84,570



167,093



163,470



435,348



411,002



843,931



791,566


Costs and expenses:








Cost of sales

151,092



138,154



293,671



270,373


Franchise support and other costs

4,066



7,031



10,084



13,204


Franchise rental expense

28,027



24,306



60,478



47,569


Advertising funds expense

88,667



84,570



169,148



163,470


General and administrative

50,784



49,163



100,097



99,519


Depreciation and amortization

31,484



33,427



64,669



65,579


System optimization (gains) losses, net

(110)



(92)



(122)



478


Reorganization and realignment costs

3,570



3,124



4,368



5,750


Impairment of long-lived assets

198



1,603



1,684



1,809


Other operating income, net

(3,003)



(1,767)



(6,985)



(2,930)



354,775



339,519



697,092



664,821


Operating profit

80,573



71,483



146,839



126,745


Interest expense, net

(29,931)



(30,136)



(59,013)



(60,314)


Loss on early extinguishment of debt

(7,150)





(7,150)



(11,475)


Other income, net

2,247



917



4,947



1,661


Income before income taxes

45,739



42,264



85,623



56,617


Provision for income taxes

(13,353)



(12,388)



(21,343)



(6,582)


Net income

$

32,386



$

29,876



$

64,280



$

50,035










Net income per share:








Basic

$

.14



$

.13



$

.28



$

.21


Diluted

.14



.12



.27



.20










Number of shares used to calculate basic income per share

231,029



238,991



230,807



239,459










Number of shares used to calculate diluted income per share

236,093



246,152



235,993



247,285


 


The Wendy's Company and Subsidiaries
Condensed Consolidated Balance Sheets
As of June 30, 2019 and December 30, 2018
(In Thousands Except Par Value)
(Unaudited)






June 30,
 2019


December 30,
2018

ASSETS




Current assets:




Cash and cash equivalents

$

426,216



$

431,405


Restricted cash

29,494



29,860


Accounts and notes receivable, net

101,083



109,805


Inventories

3,546



3,687


Prepaid expenses and other current assets

18,622



14,452


Advertising funds restricted assets

93,422



76,509


Total current assets

672,383



665,718


Properties

992,302



1,023,267


Finance lease assets

197,691



189,969


Operating lease assets

895,280




Goodwill

755,887



747,884


Other intangible assets

1,257,323



1,294,153


Investments

47,920



47,660


Net investment in sales-type and direct financing leases

241,584



226,477


Other assets

103,523



96,907


Total assets

$

5,163,893



$

4,292,035






LIABILITIES AND STOCKHOLDERS' EQUITY




Current liabilities:




Current portion of long-term debt

22,750



23,250


Current portion of finance lease liabilities

9,917



8,405


Current portion of operating lease liabilities

43,321




Accounts payable

17,315



21,741


Accrued expenses and other current liabilities

148,852



150,636


Advertising funds restricted liabilities

99,120



80,153


Total current liabilities

341,275



284,185


Long-term debt

2,274,967



2,305,552


Long-term finance lease liabilities

465,226



447,231


Long-term operating lease liabilities

931,033




Deferred income taxes

271,283



269,160


Deferred franchise fees

91,588



92,232


Other liabilities

140,473



245,226


Total liabilities

4,515,845



3,643,586


Commitments and contingencies




Stockholders' equity:




Common stock, $0.10 par value; 1,500,000 shares authorized; 470,424
  shares issued; 231,092 and 231,233 shares outstanding, respectively

47,042



47,042


Additional paid-in capital

2,883,484



2,884,696


Retained earnings

163,249



146,277


Common stock held in treasury, at cost; 239,332 and 239,191 shares, respectively

(2,393,914)



(2,367,893)


Accumulated other comprehensive loss

(51,813)



(61,673)


Total stockholders' equity

648,048



648,449


Total liabilities and stockholders' equity

$

5,163,893



$

4,292,035


 


The Wendy's Company and Subsidiaries
Condensed Consolidated Statements of Cash Flows
Six Month Periods Ended June 30, 2019 and July 1, 2018
(In Thousands)
(Unaudited)




Six Months Ended


2019


2018

Cash flows from operating activities:




Net income

$

64,280



$

50,035


Adjustments to reconcile net income to net cash provided by operating activities:




Depreciation and amortization

64,669



65,579


Share-based compensation

10,008



9,591


Impairment of long-lived assets

1,684



1,809


Deferred income tax

3,422



(2,508)


Non-cash rental expense (income), net

11,519



(6,239)


Change in operating lease liabilities

(20,983)




Net receipt of deferred vendor incentives

5,312



4,904


System optimization (gains) losses, net

(122)



478


Distributions received from joint ventures, net of equity in earnings

2,099



2,108


Long-term debt-related activities, net

10,799



15,036


Changes in operating assets and liabilities and other, net

1,373



7,628


Net cash provided by operating activities

154,060



148,421


Cash flows from investing activities:




Capital expenditures

(25,484)



(23,898)


Acquisitions

(5,052)




Dispositions

1,240



1,814


Proceeds from sale of investments

130




Notes receivable, net

(750)



(538)


Payments for investments



(13)


Net cash used in investing activities

(29,916)



(22,635)


Cash flows from financing activities:




Proceeds from long-term debt

850,000



930,809


Repayments of long-term debt

(877,876)



(878,849)


Repayments of finance lease liabilities

(3,521)



(2,784)


Deferred financing costs

(14,008)



(17,340)


Repurchases of common stock

(50,781)



(84,307)


Dividends

(46,193)



(40,645)


Proceeds from stock option exercises

19,160



13,197


Payments related to tax withholding for share-based compensation

(6,957)



(9,269)


Contingent consideration payment



(6,100)


Net cash used in financing activities

(130,176)



(95,288)


Net cash (used in) provided by operations before effect of exchange rate changes on cash

(6,032)



30,498


Effect of exchange rate changes on cash

3,866



(4,401)


Net (decrease) increase in cash, cash equivalents and restricted cash

(2,166)



26,097


Cash, cash equivalents and restricted cash at beginning of period

486,512



212,824


Cash, cash equivalents and restricted cash at end of period

$

484,346



$

238,921


 


The Wendy's Company and Subsidiaries
Reconciliations of Net Income to Adjusted EBITDA and Revenues to Adjusted Revenues
Three and Six Month Periods Ended June 30, 2019 and July 1, 2018
(In Thousands)
(Unaudited)






Three Months Ended


Six Months Ended


2019


2018


2019


2018









Net income

$

32,386



$

29,876



$

64,280



$

50,035


Provision for (benefit from) income taxes

13,353



12,388



21,343



6,582


Income before income taxes

45,739



42,264



85,623



56,617


Other income, net

(2,247)



(917)



(4,947)



(1,661)


Loss on early extinguishment of debt

7,150





7,150



11,475


Interest expense, net

29,931



30,136



59,013



60,314


Operating profit

80,573



71,483



146,839



126,745


Plus (less):








Advertising funds revenue

(86,612)



(84,570)



(167,093)



(163,470)


Advertising funds expense

88,667



84,570



169,148



163,470


Depreciation and amortization

31,484



33,427



64,669



65,579


System optimization (gains) losses, net

(110)



(92)



(122)



478


Reorganization and realignment costs

3,570



3,124



4,368



5,750


Impairment of long-lived assets

198



1,603



1,684



1,809


Adjusted EBITDA

$

117,770



$

109,545



$

219,493



$

200,361










Revenues

$

435,348



$

411,002



$

843,931



$

791,566


Less:








Advertising funds revenue

(86,612)



(84,570)



(167,093)



(163,470)


Adjusted revenues

$

348,736



$

326,432



$

676,838



$

628,096










Adjusted EBITDA margin

33.8

%


33.6

%


32.4

%


31.9

%

 

 


The Wendy's Company and Subsidiaries
Reconciliation of Net Income and Diluted Earnings Per Share to
Adjusted Income and Adjusted Earnings Per Share
Three and Six Month Periods Ended June 30, 2019 and July 1, 2018
(In Thousands Except Per Share Amounts)
(Unaudited)






Three Months Ended


Six Months Ended


2019


2018


2019


2018









Net income

$

32,386



$

29,876



$

64,280



$

50,035


Plus (less):








Advertising funds revenue

(86,612)



(84,570)



(167,093)



(163,470)


Advertising funds expense

88,667



84,570



169,148



163,470


System optimization (gains) losses, net

(110)



(92)



(122)



478


Reorganization and realignment costs

3,570



3,124



4,368



5,750


Impairment of long-lived assets

198



1,603



1,684



1,809


Loss on early extinguishment of debt

7,150





7,150



11,475


Total adjustments

12,863



4,635



15,135



19,512


Income tax impact on adjustments (a)

(2,753)



(1,104)



(3,572)



(4,972)


Tax reform



828





(2,795)


Total adjustments, net of income taxes

10,110



4,359



11,563



11,745










Adjusted income

$

42,496



$

34,235



$

75,843



$

61,780










Diluted earnings per share

$

.14



$

.12



$

.27



$

.20


Total adjustments per share, net of income taxes

.04



.02



.05



.05


Adjusted earnings per share

$

.18



$

.14



$

.32



$

.25


 

(a)

The provision for (benefit from) income taxes on "System optimization (gains) losses, net" was $29 and $102 for the three months ended June 30, 2019 and July 1, 2018, respectively, and $(211) and $(46) for the six months ended June 30, 2019 and July 1, 2018, respectively.  The benefit from income taxes on all other adjustments (excluding the advertising funds adjustments) was calculated using an effective tax rate of 25.48% and 25.52% for the three months ended June 30, 2019 and July 1, 2018, respectively, and 25.46% and 25.88% for the six months ended June 30, 2019 and July 1, 2018, respectively.

 


The Wendy's Company and Subsidiaries
Reconciliation of Net Cash Provided by Operating Activities to Free Cash Flow
Six Month Periods Ended June 30, 2019 and July 1, 2018
(In Thousands)
(Unaudited)




Six Months Ended


2019


2018

Net cash provided by operating activities

$

154,060



$

148,421


Less:




Capital expenditures

(25,484)



(23,898)


Advertising funds impact (a)

(3,280)



(6,734)


Free cash flow

$

125,296



$

117,789


 

(a)

Represents the net change in the restricted operating assets and liabilities of our advertising funds, which is included in "Changes in operating assets and liabilities and other, net," and the excess of advertising funds expense over advertising funds revenue, which is included in "Net income."

 

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SOURCE The Wendy's Company