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Wendy's International, Inc. News
Wendy's Announces 2007 Full Year and 4th Quarter Results
DUBLIN, Ohio,
Including full-year pre-tax expenses related to the Board of Director's Special Committee of
— Income from continuing operations of $86.6 million, up 134.0% compared to $37.0 million in 2006; — Diluted earnings per share (EPS) from continuing operations of $0.96, up 200.0% from $0.32 per share in 2006; and — Earnings before interest, taxes, depreciation and amortization (EBITDA) from continuing operations of $270.9 million, up 65.2% from $164.0 million in 2006.
Excluding 2007 expenses related to the Board's Special Committee and restructuring charges and excluding 2006 restructuring charges, incremental advertising expenses and lost joint venture income, the Company reported for the full year of 2007:
— Adjusted income from continuing operations of $108.0 million, up 50.0% from $72.0 million in 2006; — Adjusted diluted EPS from continuing operations of $1.20, up 93.5% from $0.62 per share in 2006; and — Adjusted EBITDA from continuing operations of $305.4 million, up 38.4% from $220.7 million in 2006. The Company met its revised 2007 full-year EBITDA guidance of $295 million to $315 million, and its revised 2007 full-year EPS guidance of $1.09 to $1.23, which excluded expenses related to the Board's Special Committee and restructuring charges. Including expenses Excluding expenses (i) Full-year Full-year Full-year Full-year 2007 2006 2007 2006 Income from continuing operations $86.6 million $37.0 million $108.0 million $72.0 million Diluted EPS from continuing operations $0.96 $0.32 $1.20 $0.62 EBITDA from continuing $270.9 $164.0 $305.4 $220.7 operations million million million million (i) See reconciliations below. For 2007, adjusted income from continuing operations, EBITDA and EPS excludes expenses related to the Board's Special Committee and restructuring charges. For 2006, adjusted income from continuing operations, EBITDA and EPS excludes restructuring charges, incremental advertising expenses and lost joint venture income. 2007 Full-Year Highlights - U.S. EBITDA store margins up 210 basis points — U.S. company-operated restaurant EBITDA margins improved 210 basis points to 11.0% in 2007, reflecting slightly positive full-year sales, improved menu management (menu price increases and favorable shifts in product mix) and labor efficiencies. The 210 basis point improvement was achieved despite higher commodity costs which negatively impacted U.S. margins by 90 basis points. — Total company-operated restaurant EBITDA margins improved 180 basis points to 10.7% in 2007, compared to 8.9% one year ago. This includes U.S., Canada and International operations. — As previously announced, annual same-store sales at U.S. franchise restaurants increased 1.4%, compared to a 0.6% increase in 2006. Wendy's franchisees have produced seven consecutive quarters of positive same-store sales. Annual same-store sales at U.S. company- operated restaurants increased 0.9%, compared to a 0.8% increase in 2006. — The total number of system-wide Wendy's(R) restaurants as of December 30, 2007, was 6,645, compared to 6,673 at year-end 2006. This reflects the opening of 92 restaurants and the closure of 120 restaurants.
Company made significant progress in 2007
"I am proud of our restaurant crews, franchisees and company employees for what we accomplished in 2007," said Chief Executive Officer and
"We produced significantly improved company store operating margins and earnings growth in the face of an incredibly challenging environment, with rising commodities and the distraction of the Special Committee process. Our goal was to deliver EBITDA in the range of
Chief Financial Officer
Company executing Phase 2 of its Strategic Plan
The Company recently launched Phase 2 of its strategic plan, which focuses on further growth in same-store sales and earnings in 2008.
"We have a powerful brand, and our objective in 2008 is to re-ignite sales growth and drive quality and innovation throughout our business," Anderson said. "In addition to a strong new product lineup for 2008 and a re-energized focus on restaurant operations, we are excited about our new advertising that highlights Wendy's unique competitive advantage of quality. Today, we are launching our 'Waaaay Better' campaign, and the hero of our new advertising will be our quality food."
The Company's evolution of its advertising approach is based on extensive consumer research over the last eight months, working in close collaboration with its agency partners and franchise advertising committee.
"Our new campaign leverages Wendy's red-hair iconography, but does so in a way that is more genuine and true to our brand," said Anderson. "Each television spot opens and closes with an animated version of our familiar logo - the enduring image of Wendy, a red-headed, little girl. Our Wendy icon stands for wholesome authenticity and honest quality. It's one of the most powerful, under-used assets in the consumer world today."
2007 4th Quarter Financial Highlights - U.S. EBITDA store margins up 120 basis points
Including fourth-quarter pre-tax expenses related to the Board's Special Committee of
— Income from continuing operations of $14.1 million, up 42.4% from $9.9 million in the fourth quarter of 2006; — Diluted EPS from continuing operations of $0.16, up 77.8% from $0.09 per share in the fourth quarter of 2006; and — EBITDA from continuing operations of $50.1 million, up 64.3% from $30.5 million in the fourth quarter of 2006.
Excluding expenses related to the Board's Special Committee and restructuring charges, the Company reported for the fourth-quarter of 2007:
— Adjusted income from continuing operations of $18.4 million, up 24.3% from $14.8 million in the fourth quarter of 2006; — Adjusted diluted EPS from continuing operations of $0.21 in the fourth quarter of 2007, up 50.0% from $0.14 per share for the fourth quarter of 2006; and — Adjusted EBITDA from continuing operations of $57.0 million, up 48.4% from $38.4 million in the fourth quarter of 2006.
U.S. company-operated restaurant EBITDA margins improved 120 basis points to 10.1% in the fourth quarter of 2007, compared to 8.9% a year ago. The 120 basis point improvement was achieved despite higher commodity costs which negatively impacted U.S. margins by 180 basis points.
Company-operated restaurant EBITDA margins improved 140 basis points to 9.8% in the fourth quarter of 2007, compared to 8.4% in the fourth quarter of 2006. This includes U.S.,
As previously announced, fourth-quarter same-store sales at U.S. franchise restaurants increased 0.2%, compared to an increase of 2.7% a year ago, and fourth-quarter same-store sales at U.S. company-operated restaurants decreased 0.8%, compared to an increase of 3.1% in the fourth quarter of 2006.
Including expenses Excluding expenses (i) 4Q 2007 4Q 2006 4Q 2007 4Q 2006 Income from continuing operations $14.1 million $9.9 million $18.4 million $14.8 million Diluted EPS from continuing operations $0.16 $0.09 $0.21 $0.14 EBITDA from continuing operations $50.1 million $30.5 million $57.0 million $38.4 million (i) See reconciliations below. Adjusted income from continuing operations, EBITDA and EPS excludes expenses related to the Board's Special Committee and restructuring charges.
Board approves 120th consecutive quarterly dividend
The Board of Directors approved a quarterly dividend of 12.5 cents per share, payable
Company plans 2007 conference call for
The Company will hold a conference call and webcast to discuss the Company's 2007 and fourth quarter results at
The dial-in number is (877) 572-6014 (U.S. and
Safe Harbor statement
Certain information in this news release, particularly information regarding future economic performance and finances, and plans, expectations and objectives of management, is forward looking. Factors set forth in our Safe Harbor under the Private Securities Litigation Reform Act of 1995, in addition to other possible factors not listed, could affect the Company's actual results and cause such results to differ materially from those expressed in forward-looking statements.
Please review the Company's Safe Harbor statement at http://www.wendys-invest.com/safeharbor.
Wendy's International, Inc. overview
Wendy's International, Inc. is one of the world's largest and most successful restaurant operating and franchising companies. More information about the Company is available at www.wendys-invest.com.
Appendix
2007 Full-Year Financial and Income Statement Information
The Company's full-year 2007 reported results from continuing operations include the impact of:
— Cost of sales - $1.32 billion, or 61.2% of sales, in 2007, compared to $1.35 billion, or 62.8% of sales, in 2006. The year-over-year improvement as a percent of retail sales is due primarily to improved menu management (menu price increases and favorable shifts in product mix) and labor efficiencies realized in company-operated restaurants. These improvements were partially offset by higher commodity costs which negatively impacted U.S. margins by 90 basis points. — Company restaurant operating costs - $597.3 million, or 27.7% of sales, in 2007, compared to $602.3 million, or 28.0% of sales, in 2006. The year-over-year improvement as a percent of sales primarily includes lower expenses as a result of the Company's 2006 cost saving initiatives and lower bonuses. These improvements were partially offset by the change in accounting for the Canadian real estate joint venture with Tim Hortons(R) (see explanation below for Wendy's joint venture with Tim Hortons). As a result of this change in accounting, full-year 2007 company restaurant operating costs included rental expense paid to the joint venture by Wendy's, which prior to the spin- off of Tim Hortons was eliminated in consolidation. Without this change in accounting for the joint venture, reported full-year 2007 company-operated restaurant EBITDA margins would have been 20 basis points higher. — Operating costs - $22.7 million in 2007, compared to $46.7 million in 2006. The year-over-year decrease is due primarily to $25.0 million in incremental advertising costs in 2006 that the Company did not incur in 2007 and a $5.7 million decline in rent expense in 2007 as a result of the change in accounting for Wendy's Canadian real estate joint venture with Tim Hortons, which is no longer consolidated by the Company. These declines were partially offset by higher incentive payments to franchisees for remodeling of $5.4 million in 2007. — General and administrative expense - $212.4 million, or 8.7% of revenue, in 2007, compared to $237.6 million, or 9.7% of revenue, in 2006. The year-over-year improvement is due primarily to lower salaries and benefits as a result of the elimination of positions in 2006, as well as lower insurance costs and bonuses. — Restructuring costs - $9.8 million in 2007, which includes $7.4 million in pension settlement charges. This compares to $38.9 million in restructuring costs in 2006. — Special Committee related charges - $24.7 million in expenses in 2007 related to the Board's Special Committee, which was formed in April 2007. These charges did not occur in 2006. — Other income/expense - $9.0 million of income in 2007, which includes equity investment income of $9.4 million, related primarily to the Company's 50/50 Canadian real estate joint venture with Tim Hortons, $5.7 million in income from the amendment of the Company's tax sharing agreement with Tim Hortons, gains on property dispositions of $5.0 million and insurance gains of $9.0 million, partially offset by store closure charges of $7.3 million, $5.0 million in impairment charges on the Company's Pasta Pomodoro investment, and other asset write-offs. In 2006, other income/expense was $1.4 million of income, which includes store closure costs of $16.7 million, gains on sales of properties of $6.8 million and rent income paid by Tim Hortons to the Canadian real estate joint venture of $14.0 million. The corresponding rent expense is classified in discontinued operations. Since the spin-off of Tim Hortons, this joint venture is no longer consolidated and the Company now records its 50% share of the joint venture income in other income/expenses. — Interest - The $9.3 million increase in interest expense in 2007 is primarily due to the sale of approximately 40% of the U.S. royalty stream for a 14-month period entered into in the fourth quarter of 2006 that was recorded as debt. The $24.1 million decrease in interest income reflects a reduction in cash balances as a result of the completion of a modified \"Dutch Auction\" tender offer in the fourth quarter of 2006, using approximately $800 million, and the completion of an accelerated share repurchase in the first quarter of 2007 for approximately $298.0 million. — Taxes - The Company's effective tax rate was 31.1% in 2007. The rate was impacted by favorable settlements of Federal and state tax examinations. — Shares outstanding - A lower share count of 90.2 million average shares in 2007, compared to 115.3 million average shares in 2006. The Company repurchased 22.4 million shares in a modified \"Dutch Auction\" tender offer in the fourth quarter of 2006, and repurchased 9.0 million shares in an accelerated share repurchase in the first quarter of 2007.
4th Quarter Financial and Income Statement Information
The Company's fourth-quarter 2007 reported results from continuing operations include the impact of:
— Cost of sales - $326.1 million, or 62.2% of retail sales, in the fourth quarter of 2007, compared to $331.0 million, or 62.8% of retail sales, in the fourth quarter of 2006, which was a 60 basis point improvement as a percentage of sales. The year-over-year improvement is due primarily to improved menu management (menu price increases and favorable shifts in product mix) and labor efficiencies realized in company-operated restaurants. — Company restaurant operating costs - $143.9 million, or 27.5% of sales, in the fourth quarter of 2007, compared to $149.5 million, or 28.4% of sales, in the fourth quarter of 2006. The year-over-year improvement as a percent of sales includes lower expenses as a result of the Company's cost saving initiatives implemented in 2006 and lower bonuses. — Operating costs - $7.6 million in the fourth quarter of 2007, compared to $4.2 million in the fourth quarter of 2006. The year-over-year increase is due primarily to incentives paid to franchisees for remodeling of $1.8 million during the quarter, and breakfast advertising costs to support franchisees of $1.0 million. — General and administrative expense - $61.0 million, or 10.2% of revenue, in the fourth quarter of 2007, compared to $67.4 million, or 11.3% of revenue, in the fourth quarter of 2006. The year-over-year improvement is due primarily to a reduction in salaries and benefits as a result of the elimination of positions in 2006, and lower bonus accruals. — Restructuring costs - $0.4 million in the fourth quarter of 2007. This compares to $7.9 million in restructuring costs in the fourth quarter of 2006. — Special Committee related charges - $6.5 million in the fourth quarter of 2007 in expenses related to the Special Committee. These charges did not occur in 2006. — Other income/expense - $0.5 million of expense in the fourth quarter of 2007, which includes $5.7 million in income from the amendment of Wendy's tax sharing agreement with Tim Hortons, insurance gains of $2.2 million and gains on property dispositions of $0.7 million, partially offset by $5.0 million in impairment charges on the Company's Pasta Pomodoro investment, store closure charges of $1.5 million, and other asset write-offs. — Interest - The $2.6 million increase in interest expense in the fourth quarter of 2007 includes interest expense related to the sale of approximately 40% of the U.S. royalty stream for a 14-month period entered into in the fourth quarter of 2006 that was recorded as debt. The $7.3 million decrease in interest income reflects a reduction in cash balances as a result of the completion of a modified \"Dutch Auction\" tender offer in the fourth quarter of 2006, using approximately $800 million, and the completion of an accelerated share repurchase in the first quarter of 2007 for approximately $298.0 million. — Taxes - The Company's effective tax rate for the fourth quarter of 2007 was a benefit of approximately 8.4% and was due primarily to the settlement of tax examinations which yielded a benefit of approximately $5.4 million. — Shares outstanding - A lower share count of 88.3 million average shares in the fourth quarter of 2007, compared to 108.8 million average shares in the fourth quarter of 2006. The Company repurchased 22.4 million shares in a modified \"Dutch Auction\" tender offer in the fourth quarter of 2006, and repurchased 9.0 million shares in an accelerated share repurchase in the first quarter of 2007.
Discontinued operations
Wendy's completed its spinoff of Tim Hortons in the third quarter of 2006 and completed the sale of Baja Fresh(R) Mexican Grill during the fourth quarter of 2006. During the third quarter of 2007, the Company completed the sale of Cafe Express. Accordingly, the after-tax operating results of Tim Hortons, Baja Fresh and Cafe Express appear in the "Discontinued Operations" line on the income statement.
Wendy's joint venture with Tim Hortons
Wendy's and Tim Hortons continue to operate approximately 100 combination restaurants in
As a result of its 2006 spinoff of Tim Hortons, the Company, in accordance with generally accepted accounting principles (GAAP), now accounts for its 50% share of the Canadian restaurant real estate joint venture with Tim Hortons under the equity method of accounting, rather than consolidating the results of the joint venture in the Company's financial statements.
Without this change, company-operated restaurant EBITDA margins would have been 10.9% for the full year. This change in accounting for the Company's joint venture with Tim Hortons impacts several lines on the Company's statement of income and resulted in an overall reduction to full-year 2007 operating income of
Disclosure regarding non-GAAP financial measures
The Company uses adjusted income and adjusted EPS from continuing operations as internal measures of operating performance. Management believes adjusted income and adjusted EPS from continuing operations provide a meaningful perspective of the underlying operating performance of the business.
EBITDA is used by management as a performance measure for benchmarking against its peers and competitors. The Company believes EBITDA is useful to investors because it is frequently used by securities analysts, investors and other interested parties to evaluate companies in the restaurant industry. EBITDA is not a recognized term under GAAP.
The Company also uses adjusted EBITDA, which accounts for certain items unrelated to ongoing operations, as an internal measure of business operating performance. Management believes adjusted EBITDA provides a meaningful perspective of the underlying operating performance of the business.
Company EBITDA margins from continuing operations consist of operating income plus depreciation and amortization divided by revenue.
Company-operated restaurant EBITDA margins consist of sales from company- operated restaurants minus cost of sales from company-operated restaurants minus company restaurant operating costs divided by sales from company- operated restaurants.
EBITDA and Adjusted EBITDA Reconciliations The following is a reconciliation of 2007 estimated operating income to 2007 estimated EBITDA used to arrive at the Company's revised 2007 earnings outlook previously announced: As previously announced, the following estimated amounts exclude expenses related to the Special Committee activities and any potential restructuring charges. 2007 estimated operating income $ 186 million to $206 million 2007 estimated depreciation and amortization $ 109 million ———————————————- ——————————————- 2007 estimated adjusted EBITDA from continuing ops: $ 295 million to $315 million The following are reconciliations for full-year 2007 and 2006 reported operating income to full-year EBITDA from continuing operations and adjusted EBITDA: 2007 Year 2006 Year ————- ————- Reported operating income $157.0 million $ 40.3 million Depreciation and amortization $113.9 million $123.7 million ———————————————- ——————— ——————— EBITDA from continuing ops $270.9 million $164.0 million Restructuring charges $ 9.8 million $ 38.9 million Special Committee expenses $ 24.7 million Incremental advertising expense $ 25.0 million Joint venture impact $ (7.2)million —————————— ——————— ——————— Adjusted EBITDA from continuing ops $305.4 million $220.7 million ============== ============== The following are reconciliations of 2007 and 2006 fourth-quarter reported operating income to fourth-quarter EBITDA from continuing operations and adjusted EBITDA: 4th Quarter 4th Quarter 2007 2006 —— —— Reported operating income $ 21.6 million $ 1.8 million Depreciation and amortization $ 28.5 million $ 28.7 million ——————————————- ——————— ——————— EBITDA from continuing ops $ 50.1 million $ 30.5 million Restructuring charges $ 0.4 million $ 7.9 million Special Committee expenses $ 6.5 million ————————————— ——————— ——————— Adjusted EBITDA from continuing ops $ 57.0 million $ 38.4 million ============== ============== Income and EPS Reconciliations The following are reconciliations of 2007 and 2006 income from continuing operations to full-year adjusted income from continuing operations: 2007 Year 2006 Year ————- ————- Income from continuing operations $ 86.6 million $ 37.0 million Restructuring charges, net of tax(1) $ 6.1 million $ 24.1 million Special Committee expenses, net of tax (1) $ 15.3 million Incremental advertising expense, net $ 15.5 million of tax (1) Joint venture impact, net of tax (1) $ (4.6)million —————————————————- ——————— ——————— Adjusted income from continuing ops $108.0 million $ 72.0 million ============== ============== Diluted shares 90.2 million 115.3 million Adjusted diluted EPS from continuing ops $ 1.20 $ 0.62 The following are reconciliations of 2007 and 2006 fourth-quarter income from continuing operations to fourth-quarter adjusted income from continuing operations: 4th Quarter 4th Quarter 2007 2006 Income from continuing operations $ 14.1 million $ 9.9 million Restructuring charges, net of tax (1) $ 0.3 million $ 4.9 million Special Committee expenses, net of tax (1) $ 4.0 million ————————————————— ——————— ——————— Adjusted income from continuing ops $ 18.4 million $ 14.8 million ============== ============== Diluted shares 88.3 million 108.8 million Adjusted diluted EPS from continuing ops $ 0.21 $ 0.14 (1) After tax amounts are generally computed using a tax rate of 38%. WENDY'S INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (In thousands, except per share data) (Unaudited) Fourth Quarter Ended 12/30/2007 12/31/2006 $ Change % Change ————— ————— ———— ———— REVENUES Sales $523,961 $526,720 ($2,759) -0.5% Franchise revenues 72,060 69,658 2,402 3.4% ————— ————— ———— ———— TOTAL REVENUES 596,021 596,378 (357) -0.1% ————— ————— ———— ———— COSTS & EXPENSES Cost of sales 326,097 331,034 (4,937) -1.5% Company restaurant operating costs 143,915 149,517 (5,602) -3.7% Operating costs 7,615 4,177 3,438 82.3% Depreciation of property & equipment 28,337 28,437 (100) -0.4% General & administrative expenses 60,959 67,413 (6,454) -9.6% Restructuring and special committee related charges 6,929 7,914 (985) -12.4% Other (income) expense, net 551 6,070 (5,519) -90.9% ————— ————— ———— ———— TOTAL COSTS & EXPENSES 574,403 594,562 (20,159) -3.4% ————— ————— ———— ———— OPERATING INCOME 21,618 1,816 19,802 n/m Interest expense (11,550) (8,958) (2,592) 28.9% Interest income 2,911 10,222 (7,311) -71.5% ————— ————— ———— ———— INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES 12,979 3,080 9,899 321.4% INCOME TAX BENEFIT (1,087) (6,869) 5,782 n/m ————— ————— ———— ———— INCOME from continuing operations $14,066 $9,949 $4,117 41.4% LOSS from discontinued operations $0 ($6,922) 6,922 -100.0% ————— ————— ———— ———— NET INCOME $14,066 $3,027 $11,039 364.7% ========== ========== ======== ======== Diluted earnings per common share from continuing operations $0.16 $0.09 $0.07 77.8% ========== ========== ======== ======== Diluted earnings per common share from discontinued operations $0.00 ($0.06) $0.06 -100.0% ========== ========== ======== ======== Total diluted earnings per common share $0.16 $0.03 $0.13 433.3% ========== ========== ======== ======== Diluted shares 88,334 108,795 (20,461) -18.8% ========== ========== ======== ======== n/m - not meaningful WENDY'S INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (In thousands, except per share data) (Unaudited) Year-to-Date Ended 12/30/2007 12/31/2006 $ Change % Change ————— ————— ———— ———— REVENUES Sales $2,160,025 $2,154,607 $5,418 0.3% Franchise revenues 290,219 284,670 5,549 1.9% ————— ————— ———— ———— TOTAL REVENUES 2,450,244 2,439,277 10,967 0.4% ————— ————— ———— ———— COSTS & EXPENSES Cost of sales 1,322,264 1,352,312 (30,048) -2.2% Company restaurant operating costs 597,285 602,298 (5,013) -0.8% Operating costs 22,725 46,674 (23,949) -51.3% Depreciation of property & equipment 113,127 122,636 (9,509) -7.8% General & administrative expenses 212,425 237,575 (25,150) -10.6% Restructuring and special committee related charges 34,427 38,914 (4,487) -11.5% Other (income) expense, net (9,006) (1,446) (7,560) n/m ————— ————— ———— ———— TOTAL COSTS & EXPENSES 2,293,247 2,398,963 (105,716) -4.4% ————— ————— ———— ———— OPERATING INCOME 156,997 40,314 116,683 289.4% Interest expense (45,010) (35,711) (9,299) 26.0% Interest income 13,769 37,876 (24,107) -63.6% ————— ————— ———— ———— INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES 125,756 42,479 83,277 196.0% INCOME TAX EXPENSE 39,131 5,433 33,698 n/m ————— ————— ———— ———— INCOME from continuing operations 86,625 37,046 49,579 133.8% INCOME from discontinued operations 1,271 57,266 (55,995) -97.8% ————— ————— ———— ———— NET INCOME (1) 87,896 94,312 (6,416) -6.8% ========== ========== ======== ======== Diluted earnings per common share from continuing operations $0.96 $0.32 $0.64 200.0% ========== ========== ======== ======== Diluted earnings per common share from discontinued operations (1) $0.01 $0.50 ($0.49) -98.0% ========== ========== ======== ======== Total diluted earnings per common share (1) $0.97 $0.82 $0.15 18.3% ========== ========== ======== ======== Diluted shares 90,190 115,325 (25,135) -21.8% ========== ========== ======== ======== n/m - not meaningful (1) Discontinued operations includes the results of Tim Hortons(R), which was spun-off in September 2006, Baja Fresh(R) Mexican Grill, which was sold in November 2006, and Cafe Express, which was sold in July 2007. Because these three businesses are no longer owned by Wendy's International, Inc., the Company believes including the results of these businesses in a comparison of results between years does not provide a reasonable comparison of ongoing business results between years. In particular, income from discontinued operations and net income for full-year 2006 included $159.8 million of income from Tim Hortons prior to its spin-off in September 2006. WENDY'S INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS December 30, December 31, 2007 2006 —————— —————— (Unaudited) (Dollars in thousands) ASSETS Current assets Cash and cash equivalents $205,200 $457,614 Accounts receivable, net 72,069 84,841 Deferred income taxes 7,304 29,651 Inventories and other 35,590 30,252 Advertising fund restricted assets 42,665 36,207 Assets held for disposition 3,338 15,455 Current assets of discontinued operations 0 2,712 ————— ————— 366,166 656,732 ————— ————— Property and equipment 2,119,140 2,024,715 Accumulated depreciation (872,255) (798,387) ————— ————— 1,246,885 1,226,328 ————— ————— Goodwill 84,001 85,353 Deferred income taxes 4,899 4,316 Intangible assets, net 2,704 3,855 Other assets 84,742 82,738 Non current assets of discontinued operations 0 1,025 ————— ————— $1,789,397 $2,060,347 ========== ========== WENDY'S INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS December 30, December 31, 2007 2006 —————— —————— (Unaudited) (Dollars in thousands) LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Accounts payable $85,662 $93,465 Accrued expenses: Salaries and wages 39,157 47,329 Taxes 31,033 46,138 Insurance 57,190 57,353 Other 45,612 32,199 Advertising fund restricted liabilities 35,760 28,568 Current portion of long-term obligations 26,591 87,396 Current liabilities of discontinued operations 0 2,218 ————— ————— 321,005 394,666 ————— ————— Long-term obligations Term debt 521,343 537,139 Capital leases 21,680 18,963 ————— ————— 543,023 556,102 ————— ————— Deferred income taxes 45,351 30,220 Other long-term liabilities 75,887 66,163 Non current liabilities of discontinued operations 0 1,519 Commitments and contingencies Shareholders' equity Preferred stock, Authorized: 250,000 shares Common stock, $.10 stated value per share, Authorized: 200,000,000 shares, Issued: 130,241,000 and 129,548,000 shares, respectively 13,024 12,955 Capital in excess of stated value 1,110,363 1,089,825 Retained earnings 1,287,963 1,241,489 Accumulated other comprehensive income (expense): Cumulative translation adjustments and other 28,949 9,100 Pension liability (18,990) (22,546) ————— ————— 2,421,309 2,330,823 Treasury stock, at cost: 42,844,000 and 33,844,000 shares, respectively (1,617,178) (1,319,146) ————— ————— 804,131 1,011,677 ————— ————— $1,789,397 $2,060,347 ========== ========== WENDY'S INTERNATIONAL, INC. AND SUBSIDIARIES SYSTEMWIDE RESTAURANTS Increase/ Increase/ As of As of (Decrease) As of (Decrease) December September From December From 30 30 Prior 31 Prior 2007 2007 Quarter 2006 Year ———————————————————————— U.S. Company 1,274 1,288 (14) 1,317 (43) Franchise 4,662 4,644 18 4,638 24 ———————————————————————— 5,936 5,932 4 5,955 (19) Canada Company 140 141 (1) 146 (6) Franchise 236 235 1 231 5 ———————————————————————— 376 376 0 377 (1) Other International Company 0 2 (2) 2 (2) Franchise 333 323 10 339 (6) ———————————————————————— 333 325 8 341 (8) Total Company 1,414 1,431 (17) 1,465 (51) Franchise 5,231 5,202 29 5,208 23 ———————————————————————— 6,645 6,633 12 6,673 (28) ================================================ WENDY'S INTERNATIONAL, INC. Income Statement Definitions Sales Includes sales from company operated restaurants. Also included are sales of kids' meal toys and the sales to franchisees from Wendy's bun baking facilities. Franchise Revenues Consists primarily of royalties, rental income, gains from the sales of properties to franchisees and franchise fees. Franchise fees include charges for various costs and expenses related to establishing a franchisee's business. Cost of Sales Includes food, paper and labor costs for restaurants. Also included are the cost of kids' meal toys and cost of goods sold to franchisees from Wendy's bun baking facilities. Company Restaurant Consists of all costs necessary to manage and operate restaurants, Operating Costs except cost of sales and depreciation. These include advertising, insurance, maintenance, rent, etc., as well as support costs for personnel directly related to restaurant operations. Operating Costs Includes rent expense related to properties leased to franchisees and other franchisee related costs such as remodel incentives. Also includes costs to operate and maintain Wendy's bun baking facilities. General and Administrative Expenses Costs that cannot be directly related to generating revenue. Restructuring and Special Committee Related Charges Includes restructuring costs and costs related to the Special Committee of the Board of Directors, which was formed to explore strategic alternatives for the Company. Other Income and Expense Includes expenses (income) that are not directly derived from the Company's primary businesses. This includes income from the Company's investments in joint ventures and other minority investments. Expenses include store closures, other asset write- offs, and sales of properties to non-franchisees. Income from Discontinued Operations Reflects net income from Tim Hortons Inc., Baja Fresh and Cafe Express.
SOURCE Wendy's International, Inc.
