Second Quarter 2010
Earnings Call & Webcast
Earnings Call & Webcast
August 12, 2010
Opening Comments
2
• Business Highlights - Roland Smith
– Economic and competitive environment
– Second quarter 2010 highlights
– Second quarter brand updates
– Recent international developments
• Financial Overview - Steve Hare
– Second quarter consolidated financial overview
– Stock repurchases and dividends
– 2010 financial outlook
• Brand Strategies and Investment Highlights - Roland Smith
• Q&A
Agenda
3
Wendy’s/Arby’s Group Reported Today:
• Second Quarter 2010 Results
• Updated 2010 Outlook
• Balance Sheet Highlights
• Adjusted EBITDA
• Selected Brand Financial Highlights
• Form 10-Q
Second Quarter 2010
4
Forward-Looking Statements and
Regulation G
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 operations. Those statements
constitute “forward-looking statements” within the meaning of the Private Securities Litigation
Reform Act of 1995 (the “Reform Act”). For all our forward-looking statements, we claim the
protection of the safe harbor for forward-looking statements contained in the Reform Act.
presentation, may contain statements that are not historical facts, including, importantly,
information concerning possible or assumed future results of our operations. Those statements
constitute “forward-looking statements” within the meaning of the Private Securities Litigation
Reform Act of 1995 (the “Reform Act”). For all our forward-looking statements, we claim the
protection of the safe harbor for forward-looking statements contained in the Reform Act.
Many important factors could affect our future results and could cause those results to differ
materially from those expressed in or implied by our forward-looking statements. Such factors,
all of which are difficult or impossible to predict accurately, and many of which are beyond our
control, include but are not limited to those identified under the caption “Forward-Looking
Statements” in our most recent earnings press release and in the “Special Note Regarding
Forward-Looking Statements and Projections” and “Risk Factors” sections of our most recent
Form 10-K and subsequent Form 10-Qs.
materially from those expressed in or implied by our forward-looking statements. Such factors,
all of which are difficult or impossible to predict accurately, and many of which are beyond our
control, include but are not limited to those identified under the caption “Forward-Looking
Statements” in our most recent earnings press release and in the “Special Note Regarding
Forward-Looking Statements and Projections” and “Risk Factors” sections of our most recent
Form 10-K and subsequent Form 10-Qs.
In addition, this presentation and certain information management may discuss in connection
with this presentation reference non-GAAP financial measures, such as earnings before
interest, taxes, depreciation and amortization, or EBITDA. Reconciliations of non-GAAP
financial measures to the most directly comparable GAAP financial measure are in the
Appendix to this presentation, and are included in the earnings release and posted on the
Investor Relations section of our website.
with this presentation reference non-GAAP financial measures, such as earnings before
interest, taxes, depreciation and amortization, or EBITDA. Reconciliations of non-GAAP
financial measures to the most directly comparable GAAP financial measure are in the
Appendix to this presentation, and are included in the earnings release and posted on the
Investor Relations section of our website.
Business Highlights
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120
110
90
80
70
60
50
40
30
20
100
Unemployment Remains High and Consumer
Confidence Declined in June and July
Confidence Declined in June and July
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QSR Brands | Value Tier |
McDonald’s | Dollar menu, including breakfast (national) $2.99 mini combo meals (regional) $0.49 hamburger/$0.59 cheeseburger (regional) |
Burger King | $1 double cheeseburger |
Taco Bell | $2 mini combo meals |
Pizza Hut | $10 any pizza |
Subway | $5 for any footlong sub |
Sonic | $2.99 footlong quarter pound Coney hotdog |
Jack in the Box | $3.99 “Really Big Chicken Sandwich” combo |
QSR Restaurant Brands are Still
Emphasizing Value Promotions
Emphasizing Value Promotions
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• Adjusted EBITDA* grew 3.2% to $120.9 million
– Net income was $10.7 million
• Wendy’s:
– 50 basis point restaurant margin improvement in company-
operated stores
operated stores
• Arby’s:
– Focused on turnaround plan to re-energize the brand
– Transactions improved to flat
• G&A Expense decreased 13.5% to $97.5 million
– Wind down of merger-related integration costs
– Decrease in staffing and compensation
*See Appendix.
Second Quarter 2010 Business
Overview
Overview
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April
May
June
Q2 2010 N.A. Same-Store Sales
Systemwide (1.7%)
Company-owned (2.9%)
Franchise (1.4%)
Restaurant Margin
Q2 2010 16.4%
Q2 2009 15.9%
Wendy’s 2nd Quarter 2010
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Beef ‘n Cheddar
Steakhouse
Toasted Sub
Toasted Sub
National:
Value Menu
Q2 2010 N.A. Same-Store Sales
Systemwide (7.4%)
Company-owned (8.8%)
Franchise (6.7%)
Restaurant Margin
Q2 2010 13.4%
Q2 2009 14.9%
April
May
June
Arby’s 2nd Quarter 2010
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Latin America/Caribbean - 216 restaurants
Europe/Middle East - 11 restaurants
Asia/Pacific - 84 restaurants
Current International Restaurants
311 as of Q2 2010
311 as of Q2 2010
International excludes 476 restaurants in Canada
Singapore
35 restaurants
(Wendy’s)
Middle East
80 restaurants
(dual-branded)
Turkey
100 restaurants
(Arby’s)
Russia
180 restaurants
(dual-branded)
Eastern Caribbean
24 restaurants
(Wendy’s)
Wendy’s/Arby’s International
Major New Development Agreements
Major New Development Agreements
Financial Overview
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Second Quarter 2010 Consolidated
Operating Results
Operating Results
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*See Appendix.
Second Quarter and YTD 2010
Adjusted EBITDA*
Adjusted EBITDA*
15
Second Quarter 2010 Net Income
and Special Items
and Special Items
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Cash Flow - First Half 2010
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Debt Capitalization
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• Stock Repurchases
– $325 million authorized for stock repurchases of which
$80 million remains available
$80 million remains available
– As of August 6, 2010, 52 million common stock shares
repurchased for $245 million, at an average per share price
of $4.69
repurchased for $245 million, at an average per share price
of $4.69
– Company may repurchase additional shares as market
conditions warrant through January 2, 2011
conditions warrant through January 2, 2011
• Quarterly Cash Dividend
– $0.015 per share
– Payable on September 15, 2010 to stockholders of record as of
September 1, 2010
September 1, 2010
Stock Repurchases and Dividends
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• 2010 Adjusted EBITDA -3% to -5%, as compared to 2009
Adjusted EBITDA* of $411.6 million, normalized for the 53rd
week (2009 net income was $5.1 million)
Adjusted EBITDA* of $411.6 million, normalized for the 53rd
week (2009 net income was $5.1 million)
– 2010 Outlook excludes approximately $8 million of Wendy’s new
breakfast advertising
breakfast advertising
– 2010 Outlook includes the following expectations for the
full-year:
full-year:
§ Flat same-store sales at Wendy’s
§ Improvement of 70 to 90 basis points in Wendy’s margin
§ Negative same-store sales at Arby’s, but improving on a year-over-year
basis
basis
§ Capital expenditures of approximately $165 million
• 2011 Adjusted EBITDA Outlook under review
Outlook
*See Appendix.
Brand Strategies and
Investment Highlights
Investment Highlights
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Wendy’s Marketing Calendar
2010
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New Salad Line at Wendy’s
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July
Aug/Sept
October
National Event
(7/18 - 8/14)
Local
(8/22 - 9/18)
National Event
(10/3 - 10/30)
(10/3 - 10/30)
2010
Arby’s Marketing Calendar
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3-Tier Value Approach:
Everyday Affordability for All Occasions
Everyday Affordability for All Occasions
Entry Value
Value Menu
Classic Favorites
Premium Value
Specialty Indulgence
Arby’s Value Strategy
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Value Menu Users have a much more positive impression
of the brand - even on non-value related attributes
Consumers Are Positive about
the Arby’s Value Menu
the Arby’s Value Menu
• 83% of users indicated that they will definitely or
probably visit again in next 30 days
probably visit again in next 30 days
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• Introducing new menu in three existing
breakfast markets
breakfast markets
– Pittsburgh
– Kansas City
– Phoenix
• Beginning television advertising in the
three markets in September
three markets in September
• Initial results are encouraging
• Expanding into additional company and
franchise markets in Q4
franchise markets in Q4
Long-Term Growth Initiatives
Wendy’s Breakfast
Wendy’s Breakfast
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• Major initiative under way to upgrade restaurants
– Wendy’s:100 remodels in 2010
– Arby’s:100 remodels in 2010
Long-Term Growth Initiatives
Remodels
Remodels
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• Investing significant resources
• Early progress encouraging
– Signed development agreements > 400 restaurants
– Brazil
– Japan
– China
Long-Term Growth Initiatives
International
International
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Investment Highlights
• Wendy’s:
– Delivering margin improvement
– Focused on “Real” brand positioning and product innovation
– Maintaining value perception
• Arby’s:
– Focused on turnaround
– Transactions are improving
– Testing core/premium value
• Investing in Long-Term Growth
• Strong Cash Flow Generator
– Sustainable positive operating cash flow generation
– $500 million of cash provides significant flexibility
www.wendysarbys.com
Q&A
Appendix
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