Restaurant News Resource Mobile Edition



« | »

The Wendy's Company Reports Third Quarter 2021 Results

The Wendy’s Company (Nasdaq: WEN) today reported unaudited results for the third quarter ended October 3, 2021.

“We are extremely proud of the progress we are making against our three strategic growth pillars,” President and Chief Executive Officer Todd Penegor said.  “We continued to grow our breakfast business, digital sales accelerated, and we meaningfully expanded our global footprint in the third quarter.  Global Same-Restaurant sales grew in the high-single digits on a 2-year basis, reinforcing the strength of our brand in a challenging environment.  Our focus on executing against our key priorities and our continued partnership with the best franchisees in the business give me confidence that we will achieve our vision of becoming the world’s most thriving and beloved restaurant brand.”

Third Quarter 2021 Summary

Operational Highlights

Third Quarter

Year-to-Date

2021

2020

2021

2020

Systemwide Sales Growth(1)

U.S.

3.7%

7.9%

12.1%

1.6%

International(2)

20.2%

(3.5)%

23.6%

(9.3)%

Global

5.3%

6.7%

13.2%

0.5%

Same-Restaurant Sales Growth(1)

U.S.

2.1%

7.0%

10.2%

0.9%

International(2)

14.7%

(2.1)%

17.4%

(7.3)%

Global

3.3%

6.1%

10.9%

—%

Systemwide Sales (In US$ Millions)(3)

U.S.

$2,791

$2,692

$8,336

$7,436

International(2)

$362

$291

$1,020

$784

Global

$3,154

$2,983

$9,356

$8,220

Restaurant Openings

U.S. – Total / Net

27 / 6

27 / 12

69 / 20

73 / 22

International – Total / Net

21 / 19

6 / (4)

60 / 43

23 / 4

Global – Total / Net

48 / 25

33 / 8

129 / 63

96 / 26

Global Reimaging Completion Percentage

70%

62%

(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 Argentina.

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

Financial Highlights

Third Quarter

Year-to-Date

2021

2020

B / (W)

2021

2020

B / (W)

(In Millions Except Per Share Amounts)

(Unaudited)

(Unaudited)

Total Revenues

$

470.3

$

452.2

4.0

%

$

1,423.8

$

1,259.5

13.0

%

Adjusted Revenues(1)

$

372.3

$

367.5

1.3

%

$

1,134.1

$

1,018.0

11.4

%

Company-Operated Restaurant Margin

14.4%

16.9%

(2.5)

%

17.4%

13.9%

3.5%

General and Administrative Expense

$

62.8

$

47.3

(32.8)

%

$

178.6

$

147.6

(21.0)

%

Operating Profit

$

80.2

$

81.3

(1.4)

%

$

290.1

$

190.7

52.1

%

Net Income

$

41.2

$

39.8

3.6

%

$

148.3

$

79.1

87.5

%

Adjusted EBITDA

$

112.2

$

118.8

(5.6)

%

$

364.2

$

305.6

19.2

%

Reported Diluted Earnings Per Share

$

0.18

$

0.17

5.9

%

$

0.66

$

0.35

88.6

%

Adjusted Earnings Per Share

$

0.19

$

0.19

%

$

0.66

$

0.40

65.0

%

Cash Flows from Operations

$

276.7

$

205.8

34.5

%

Capital Expenditures

$

(43.4)

$

(44.9)

3.3

%

Free Cash Flow(2)

$

273.7

$

133.6

104.9

%

(1) Total revenues less advertising funds revenue.

(2) Cash flows from operations minus capital expenditures, the impact of our advertising funds and cash paid for taxes related to the disposition
of the New York market in Q2 2021.

Third Quarter Financial Highlights

Total Revenues
The increase in revenues was primarily driven by higher franchise fees, as well as an increase in advertising funds and franchise royalty revenue, both of which were largely due to higher same-restaurant sales. The increase was partially offset by lower sales at Company-operated restaurants due to the sale of the Company’s New York market during the second quarter of 2021.

Company-Operated Restaurant Margin
The decrease in Company-operated restaurant margin was primarily the result of labor rate increases, higher commodity costs, lower local advertising spend in the prior year, and customer count declines. These decreases were partially offset by a higher average check.

General and Administrative Expense
The increase in general and administrative expense was primarily driven by higher incentive and stock compensation accruals, technology costs primarily related to the Company’s ERP implementation, and increased travel expenses.

Operating Profit
The decrease in operating profit resulted primarily from higher general and administrative expense, a decrease in Company-operated restaurant margin, and higher franchise support and other costs. These decreases were partially offset by higher franchise royalty revenue and fees.

Net Income
The increase in net income resulted primarily from lower interest expense as a result of the Company’s debt refinancing completed in the second quarter of 2021. This was partially offset by a decrease in operating profit.

Adjusted EBITDA
The decrease in adjusted EBITDA resulted primarily from higher general and administrative expense, a decrease in Company-operated restaurant margin, and higher franchise support and other costs. These decreases were partially offset by higher franchise royalty revenue and fees.

Adjusted Earnings Per Share
Adjusted earnings per share was flat to the prior year driven by lower adjusted EBITDA offset by a decrease in interest expense and lower depreciation and amortization expense.

Year to Date Free Cash Flow
The increase in free cash flow resulted primarily from higher net income, the impact from the cash payment related to the settlement of the financial institutions case in January 2020, the timing of receipts of franchisee rental payments, and the timing of accrued compensation payments.

Company Declares Quarterly Dividend
The Company announced today the declaration of its regular quarterly cash dividend of 12 cents per share, payable on December 15, 2021, to shareholders of record as of December 1, 2021. The number of common shares outstanding as of November 3, 2021 was approximately 221 million.

Company Increases Share Repurchase Authorization by $80 Million; Announces $125 Million Accelerated Share Repurchase Program
The Company announced today that its Board of Directors has approved an increase to the Company’s existing share repurchase authorization of $80 million to a total of $300 million. As part of this increased authorization, the Company intends to launch a $125 million accelerated share repurchase program in the fourth quarter of 2021. 

The Company repurchased 1.9 million shares for $43.8 million in the third quarter of 2021 and has repurchased 0.7 million shares for $15.5 million thus far in the fourth quarter of 2021. As of the date of this release, approximately $125.1 million remains available under the Company’s increased $300 million share repurchase authorization that expires in February 2022.

2021 Outlook

During 2021, the Company Now Expects:

Company to Host Virtual Investor Day on March 10, 2022 and Release Preliminary Fourth Quarter and Full-Year 2021 Results on February 10, 2022
The Company will host a virtual investor day on Thursday, March 10, 2022 where it plans to provide an update on its long-term strategic vision, re-introduce its long-term outlook, and issue its outlook for 2022. The event will be available to all interested parties via webcast from the Company’s Investor Relations website at www.irwendys.com.

In advance of its Investor Day, the Company plans to release its preliminary fourth quarter and full-year 2021 results on Thursday, February 10, 2022. The Company will host a conference call that same morning at 8:30 a.m. ET, with a simultaneous webcast from the Company’s Investor Relations website at www.irwendys.com.

The Wendys Company and Subsidiaries

Condensed Consolidated Statements of Operations

Three and Nine Month Periods Ended October 3, 2021 and September 27, 2020

(In Thousands Except Per Share Amounts)

(Unaudited)

Three Months Ended

Nine Months Ended

2021

2020

2021

2020

Revenues:

Sales

$

171,078

$

191,946

$

553,660

$

522,961

Franchise royalty revenue

116,521

109,344

344,421

301,891

Franchise fees

22,234

7,476

53,825

19,754

Franchise rental income

62,446

58,721

182,190

173,434

Advertising funds revenue

97,976

84,755

289,699

241,468

470,255

452,242

1,423,795

1,259,508

Costs and expenses:

Cost of sales

146,436

159,545

457,440

450,170

Franchise support and other costs

10,509

5,960

27,080

19,427

Franchise rental expense

34,424

32,426

101,058

93,024

Advertising funds expense

108,529

92,048

310,642

253,353

General and administrative

62,840

47,322

178,576

147,553

Depreciation and amortization

30,940

32,966

93,243

98,726

System optimization gains, net

(1,437)

(23)

(32,719)

(2,333)

Reorganization and realignment costs

345

3,375

7,381

10,196

Impairment of long-lived assets

566

23

1,831

4,727

Other operating income, net

(3,092)

(2,748)

(10,800)

(6,076)

390,060

370,894

1,133,732

1,068,767

Operating profit

80,195

81,348

290,063

190,741

Interest expense, net

(26,000)

(29,086)

(82,990)

(86,696)

Loss on early extinguishment of debt

(17,917)

Other income, net

171

181

461

1,113

Income before income taxes

54,366

52,443

189,617

105,158

Provision for income taxes

(13,195)

(12,690)

(41,356)

(26,060)

Net income

$

41,171

$

39,753

$

148,261

$

79,098

Net income per share:

Basic

$

.19

$

.18

$

.67

$

.35

Diluted

.18

.17

.66

.35

Number of shares used to calculate basic income
per share

222,373

223,907

222,527

223,521

Number of shares used to calculate diluted income
per share

225,058

228,317

225,728

227,833

The Wendys Company and Subsidiaries

Condensed Consolidated Balance Sheets

As of October 3, 2021 and January 3, 2021

(In Thousands Except Par Value)

(Unaudited) 

October 3,

2021

January 3,

2021

ASSETS

Current assets:

Cash and cash equivalents

$

571,502

$

306,989

Restricted cash

36,321

33,973

Accounts and notes receivable, net

100,265

109,891

Inventories

4,257

4,732

Prepaid expenses and other current assets

23,820

89,732

Advertising funds restricted assets

107,320

142,306

Total current assets

843,485

687,623

Properties

873,250

915,889

Finance lease assets

210,660

206,153

Operating lease assets

783,986

821,480

Goodwill

751,805

751,049

Other intangible assets

1,209,695

1,224,960

Investments

41,356

44,574

Net investment in sales-type and direct financing leases

305,242

268,221

Other assets

137,468

120,057

Total assets

$

5,156,947

$

5,040,006

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Current portion of long-term debt

$

32,750

$

28,962

Current portion of finance lease liabilities

15,915

12,105

Current portion of operating lease liabilities

45,541

45,346

Accounts payable

26,506

31,063

Accrued expenses and other current liabilities

158,800

155,321

Advertising funds restricted liabilities

127,673

140,511

Total current liabilities

407,185

413,308

Long-term debt

2,360,763

2,218,163

Long-term finance lease liabilities

528,775

506,076

Long-term operating lease liabilities

830,488

865,325

Deferred income taxes

279,813

280,755

Deferred franchise fees

90,086

89,094

Other liabilities

117,083

117,689

Total liabilities

4,614,193

4,490,410

Commitments and contingencies

Stockholders’ equity:

Common stock, $0.10 par value; 1,500,000 shares authorized; 470,424 shares
issued; 221,301 and 224,268 shares outstanding, respectively

47,042

47,042

Additional paid-in capital

2,911,552

2,899,276

Retained earnings

317,956

238,674

Common stock held in treasury, at cost; 249,123 and 246,156 shares, respectively

(2,685,063)

(2,585,755)

Accumulated other comprehensive loss

(48,733)

(49,641)

Total stockholders’ equity

542,754

549,596

Total liabilities and stockholders’ equity

$

5,156,947

$

5,040,006

The Wendy’s Company and Subsidiaries

Condensed Consolidated Statements of Cash Flows

Nine Month Periods Ended October 3, 2021 and September 27, 2020

(In Thousands)

(Unaudited)

Nine Months Ended

2021

2020

Cash flows from operating activities:

Net income

$

148,261

$

79,098

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

Depreciation and amortization

93,243

98,726

Share-based compensation

16,735

15,112

Impairment of long-lived assets

1,831

4,727

Deferred income tax

(25)

5,878

Non-cash rental expense, net

28,421

19,967

Change in operating lease liabilities

(34,220)

(29,539)

Net receipt of deferred vendor incentives

1,906

5,061

System optimization gains, net

(32,719)

(2,333)

Distributions received from joint ventures, net of equity in earnings

3,561

1,187

Long-term debt-related activities, net

23,043

4,866

Changes in operating assets and liabilities and other, net

26,636

3,009

Net cash provided by operating activities

276,673

205,759

Cash flows from investing activities:

Capital expenditures

(43,401)

(44,876)

Acquisitions

4,879

Dispositions

52,657

3,570

Proceeds from sale of investments

169

Notes receivable, net

907

138

Net cash provided by (used in) investing activities

15,042

(40,999)

Cash flows from financing activities:

Proceeds from long-term debt

1,100,000

153,315

Repayments of long-term debt

(955,782)

(174,959)

Repayments of finance lease liabilities

(9,021)

(5,850)

Deferred financing costs

(20,873)

(2,122)

Repurchases of common stock

(125,656)

(46,667)

Dividends

(68,963)

(49,176)

Proceeds from stock option exercises

27,204

15,540

Payments related to tax withholding for share-based compensation

(4,390)

(5,409)

Net cash used in financing activities

(57,481)

(115,328)

Net cash provided by operations before effect of exchange rate changes on cash

234,234

49,432

Effect of exchange rate changes on cash

177

(1,715)

Net increase in cash, cash equivalents and restricted cash

234,411

47,717

Cash, cash equivalents and restricted cash at beginning of period

418,241

358,707

Cash, cash equivalents and restricted cash at end of period

$

652,652

$

406,424

The Wendys Company and Subsidiaries

Reconciliations of Net Income to Adjusted EBITDA and Revenues to Adjusted Revenues

Three and Nine Month Periods Ended October 3, 2021 and September 27, 2020

(In Thousands)

(Unaudited)

Three Months Ended

Nine Months Ended

2021

2020

2021

2020

Net income

$

41,171

$

39,753

$

148,261

$

79,098

Provision for income taxes

13,195

12,690

41,356

26,060

Income before income taxes

54,366

52,443

189,617

105,158

Other income, net

(171)

(181)

(461)

(1,113)

Loss on early extinguishment of debt

17,917

Interest expense, net

26,000

29,086

82,990

86,696

Operating profit

80,195

81,348

290,063

190,741

Plus (less):

Advertising funds revenue

(97,976)

(84,755)

(289,699)

(241,468)

Advertising funds expense (a)

99,550

85,895

294,139

245,015

Depreciation and amortization

30,940

32,966

93,243

98,726

System optimization gains, net

(1,437)

(23)

(32,719)

(2,333)

Reorganization and realignment costs

345

3,375

7,381

10,196

Impairment of long-lived assets

566

23

1,831

4,727

Adjusted EBITDA

$

112,183

$

118,829

$

364,239

$

305,604

Revenues

$

470,255

$

452,242

$

1,423,795

$

1,259,508

Less:

Advertising funds revenue

(97,976)

(84,755)

(289,699)

(241,468)

Adjusted revenues

$

372,279

$

367,487

$

1,134,096

$

1,018,040

(a) 

Excludes advertising funds expense of $8,979 and $16,503 for the three and nine months ended October 3, 2021, respectively, and $6,153 and $8,338 for the three and nine months ended September 27, 2020, respectively, related to the Company’s funding of incremental advertising.

The Wendys Company and Subsidiaries

Reconciliation of Net Income and Diluted Earnings Per Share to

Adjusted Income and Adjusted Earnings Per Share

Three and Nine Month Periods Ended October 3, 2021 and September 27, 2020

(In Thousands Except Per Share Amounts)

(Unaudited)

Three Months Ended

Nine Months Ended

2021

2020

2021

2020

Net income

$

41,171

$

39,753

$

148,261

$

79,098

Plus (less):

Advertising funds revenue

(97,976)

(84,755)

(289,699)

(241,468)

Advertising funds expense (a)

99,550

85,895

294,139

245,015

System optimization gains, net

(1,437)

(23)

(32,719)

(2,333)

Reorganization and realignment costs

345

3,375

7,381

10,196

Impairment of long-lived assets

566

23

1,831

4,727

Loss on early extinguishment of debt

17,917

Total adjustments

1,048

4,515

(1,150)

16,137

Income tax impact on adjustments (b)

291

(868)

1,811

(4,566)

Total adjustments, net of income taxes

1,339

3,647

661

11,571

Adjusted income

$

42,510

$

43,400

$

148,922

$

90,669

Diluted earnings per share

$

.18

$

.17

$

.66

$

.35

Total adjustments per share, net of income taxes

.01

.02

.05

Adjusted earnings per share

$

.19

$

.19

$

.66

$

.40

(a)

Excludes advertising funds expense of $8,979 and $16,503 for the three and nine months ended October 3, 2021, respectively, and $6,153 and $8,338 for the three and nine months ended September 27, 2020, respectively, related to the Company’s funding of incremental advertising.

(b)

The provision for (benefit from) income taxes on “System optimization gains, net” was $536 and $6 for the three months ended October 3, 2021 and September 27, 2020, respectively, and $8,802 and $(728) for the nine months ended October 3, 2021 and September 27, 2020, respectively.  The benefit from income taxes on all other adjustments (excluding the advertising funds adjustments) was calculated using an effective tax rate of 26.89% and 25.72% for the three months ended October 3, 2021 and September 27, 2020, respectively, and 25.77% and 25.72% for the nine months ended October 3, 2021 and September 27, 2020, respectively.

The Wendys Company and Subsidiaries

Reconciliation of Net Cash Provided by Operating Activities to Free Cash Flow

Nine Month Periods Ended October 3, 2021 and September 27, 2020

(In Thousands)

(Unaudited)

Nine Months Ended

2021

2020

Net cash provided by operating activities

$

276,673

$

205,759

Plus (less):

Capital expenditures

(43,401)

(44,876)

Cash paid for taxes related to New York disposition

9,512

Advertising funds impact (a)

30,876

(27,297)

Free cash flow

$

273,660

$

133,586

(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.”

SOURCE The Wendy’s Company

Posted by on November 10, 2021.

Categories: Financial

« | »




Recent Posts


Pages