Wendy’s/Arby’s Group, Inc. (WEN)
F1Q10 Earnings Call
May 13, 2010 10:30 am ET
John Barker – SVP and Chief Communications Officer
Roland Smith – President and CEO
Steve Hare – SVP and CFO
John Glass – Morgan Stanley
Matt DiFrisco – Oppenheimer
Michael Gallo – C.L. King
Joe Buckley – Bank of America/Merrill Lynch
Jeffrey Bernstein – Barclays Capital
David Palmer – UBS
John Ivankoe – JP Morgan
Tom Forte – Telsey Advisory Group
Previous Statements by WEN
» Wendy’s/Arby’s Group, Inc. Q4 2009 Earnings Call Transcript
» Wendy’s/Arby’s Group Inc. Q3 2009 Earnings Call Transcript
» Wendy’s/Arby’s Group Inc. Q2 2009 Earnings Call Transcript
Welcome to Wendy’s/Arby’s Group’s first quarter 2010 conference call. Our hosts today are John Barker, Chief Communications Officer; Roland Smith, President and Chief Executive Officer; and Steve Hare, Chief Financial Officer. (Operator instructions) I would now like to turn the call over to John Barker. You may begin sir.
Thanks, good morning everyone. Today’s conference call and web cast is accompanied by a PowerPoint presentation which can be found on our Investor Relations page on our corporate website that is wendysarbys.com. For those of you who are listening by the phone, be sure to make sure that you select the appropriate web cast player option from our website to ensure that the slides and the audio are in sync.
The agenda for today’s conference call and our web cast will begin with remarks from our President and CEO, Roland Smith, who will discuss our first quarter highlights. Chief Financial Officer, Steve Hare, will review financial results in greater detail and will discuss our 2010 outlook. Following Steve’s discussion Roland will come back and update you on Wendy’s and Arby’s brands and our international business and then we will open up the line for Q&A.
I would like to take a moment to summarize what is included in the financial statements which are attached to today’s earnings release. There’s a P&L with a full consolidated first quarter 2010 results. Also included in today’s release are key balance sheet items and a table for the first quarter of 2010 shows our EBITDA, a reconciliation of EBITDA to the reported net loss and adjusted EBITDA which excludes integration related and nonrecurring items. We have also provided selected financial highlights for each brand with same store sales, revenues, 4-wall restaurant EBITDA margin percent and the total number of restaurants at quarter end.
In addition, we filed our form 10-Q for the Wendy’s/Arby’s Group this morning and later today we will file our form 10-Q for Wendy's/Arby's Restaurants which is a subsidiary of Wendy's/Arby's Group.
Now before we begin, I would like to refer you for just a minute to the Safe Harbor statement that is attached to today’s release. Certain information that we may discuss today regarding future performance such as financial goals, plans and development, is forward-looking. Various factors could affect the company’s results and cause those results to differ materially from those expressed in our forward-looking statements.
Some of those factors are referenced in the Safe Harbor statement that is attached to the news release. Also some of the comments today will reference non-GAAP financial measures such as earnings before interest, taxes, depreciation and amortization. We have provided you reconciliations of non-GAAP financial measures to the most directly comparable GAAP financial measures.
Now, let me turn the call over to Roland.
Good afternoon everyone, and thanks again for joining us today. We are pleased with our first quarter EBITDA results. Adjusted EBITDA was $92.1 million, an increase of 14.7% compared to year-ago.
At Wendy’s we produced positive same store sales and improved company operated restaurant EBITDA margins by 430 basis points compared to the same quarter a year ago. At Arby’s we focused on our turnaround plan and the rollout of our new Everyday Value Menu. While same store sales and margins declined in the first quarter we are encouraged with the transaction improvement and I will talk more about that in a moment.
Now I would like to share first quarter 2010 performance highlights for both Wendy’s and Arby’s. At Wendy’s first quarter system wide same store sales increased 0.8%. We believe this was among the strongest sales performance in the industry. It is also important to point out we were rolling over our strongest quarter of same store sales growth in 2009 and we were negatively impacted by severe winter weather in February.
Wendy’s company operated restaurant margin was 15.4% for the first quarter, reflecting a 430 basis point increase versus a year ago. Approximately 300 basis points were driven by operational improvements in labor and controllables, lower advertising costs, as well as menu mix shifts to premium and higher margin products and about 130 basis points of improvement was driven by lower commodity costs.
Now let me talk about our first quarter marketing calendar at Wendy’s. In January we promoted our $0.99 Spicy Chicken Nuggets which drove improvement in same store sales. In February we featured our premium fish sandwich. In March we were pleased with the successful introduction of Wendy’s new Bacon and Blue Premium Hamburger. We are continuing to improve our entire hamburger line and we are very optimistic about enhancements to our ground beef, buns, fresh toppings and condiments that are currently in test.
Now I will review Arby’s first quarter. At Arby’s, system wide same store sales decreased 11.5% in the first quarter. Arby’s generated a 10.8% restaurant margin, a decline from last year due to sales de-leveraging. Now let’s review Arby’s first quarter marketing calendar. Arby’s continued to rollout the Dollar Value Menu in the first quarter. In January about half of our system promoted the Dollar Value Menu. Arby’s same store sales improved to negative 3.9% during the last three weeks of the month, after the start of local television advertising.