Wendy's Co - FORM 8-K - EX-99.1 - EXHIBIT 99.1 - March 4, 2010

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8-K - FORM 8-K - Wendy's Coform8-k_030410.htm
EXHIBIT 99.1
 
Fourth Quarter and Full-Year 2009
Earnings Call
March 4, 2010
 
 
 
Opening Comments
John Barker
SVP and Chief Communications Officer
 
 
 
2
§ Business Highlights - Roland Smith
 − Fourth quarter
 − Full-year 2009
§ 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 & Roland Smith
§ Q&A
Agenda
 
 
 
3
Wendy’s/Arby’s Group Reported Today:
§ Fourth Quarter and Full-Year 2009 Results
 − Q4 2009
 − 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 Quarter 2009
 
 
 
4
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 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.
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.
 
 
 
Fourth Quarter and
Full-Year 2009 Highlights
Roland Smith
President & Chief Executive Officer
 
 
 
6
§ 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 Schedule
§ Repositioned Wendy’s Brand
§ Drove Product Innovation at Both Brands
§ Implemented Improved Value Strategies at Both Brands
§ Formed Wendy’s Purchasing Co-op
§ Delivered Strong Cash Flow and Financial Flexibility
*See Appendix.
2009 Key Accomplishments
 
 
 
7
§ 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.
2009 Q4 Business Overview
 
 
 
8
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 (-1.0%) of fewer restaurants serving breakfast.
*
 
 
 
9
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 restaurants serving breakfast.
*
 
 
 
110
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)
 
 
 
11
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
 
 
 
Financial Overview









Steve Hare
Chief Financial Officer
 
 
 
13
2009 Q4 Consolidated
Operating Results
 
 
 
14
*See Appendix.
2009 Q4 EBITDA and
Adjusted EBITDA*
 
 
 
15
2009 Consolidated Operating Results
 
 
 
16
*See Appendix.
2009 EBITDA and Adjusted EBITDA*
 
 
 
17
Wendy’s Contributes Majority of Adjusted EBITDA
Wendy’s
82%
Arby’s
18%
% of Consolidated Adjusted EBITDA
*See Appendix.
2009 Adjusted EBITDA* by Brand
 
 
 
18
2008
2009
2010
2011
2009 Actual
$62 million
Plan
$60 million
Merger
Achieved Targeted G&A
Synergies Ahead of Schedule
 
 
 
19
Strong Cash Flow - 2009
 
 
 
20
(1)Adjusted EBITDA for 2008 is pro-forma. See appendix.
Debt Capitalization
 
 
 
21
§ 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
§ Quarterly Cash Dividend
 – $0.015 per share
 – Payable on March 15, 2010 to stockholders of record as
 of March 1, 2010
Recent Board Actions
 
 
 
2010 Overview
 
 
 
23
Source: Bureau of Labor Statistics.
Unemployment rate
remains high at 9.7%
No job growth in
the U.S.
 
 
 
24
Consumer Confidence Continues to
Run Below Healthy Economic Levels
Source: The Conference Board
Consumer confidence
fell 10 points to a
10-month low
Consumer Confidence Index
 
 
 
25
Consumers Continue to Pay Down Debt
Causing Less Consumer Spending
Source: Federal Reserve
Consumer Revolving Credit Outstanding:
% Change vs. Year Ago
 
 
 
26
§ 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 Digit Growth in Adjusted EBITDA
 – Excludes effect of 53rd week ($14 million in 2009)
 – Excludes investment spending on Wendy’s breakfast
 ($9 million in 2010)
Financial Outlook 2010
 
 
 
2010 Brand Overview
Roland Smith
President & Chief Executive Officer

 
 
 
Wendy’s Brand
 
 
 
29
§ 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 Program
Wendy’s Initiatives in 2010
 
 
 
30
Wendy’s 1st Quarter Calendar
January
February
March
99¢
Premium
Cod
 
 
 
31
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
 
 
 
32
§ 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%
330 bps 2009
15.8%-16.0%
Wendy’s Margin Improvement
 
 
 
33
§ Steady Improvement in Operations
 – Number of “A” and “B” stores increased by 35 points
Continue to Improve Wendy’s
Restaurant Operations
Q1 2008
Q4 2009
 
 
 
34
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
 
 
 
35
§ 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
 
 
 
36
§ 2009: 90 Remodels Complete
§ 2010: 100 Remodels Planned
 
 
Curv
e
Tower
Wendy’s Remodeling Plan
 
 
 
Arby’s Brand
 
 
 
38
§ 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
 
 
 
39
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
 
 
 
40
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”
 
 
 
41
STARTING
AT
§ National Advertising for $1 Value begins in April
Arby’s - Value Strategy
 
 
 
42
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
 
 
 
43
§ 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
 
 
 
International
 
 
 
45
§ 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 opening in Dubai
 in Q2
§ Long-Term:
 – Potential for 8,000 restaurants outside of
 North America
Singapore 1st Store Grand Opening
Artist rendering of first dual-branded unit in the Middle East
International Growth
 
 
 
46
§ 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-to-Mid Single Digits Growth in 2010
 Adjusted EBITDA
§ Expect to Return to Mid-Teens Adjusted EBITDA
 Growth in 2011
2010 Summary
 
 
 
www.wendysarbys.com
Q&A
 
 
 
Appendix
 
 
 
49
 
 
 
50
 
 
 

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