Wendy's Company (The) (WEN)

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The Wendy's (WEN)

Q2 2011 Earnings Call

August 11, 2011 11:00 am ET


Stephen Hare - Chief Financial Officer and Senior Vice President

Roland Smith - Chief Executive Officer, President, Director, Member of Executive Committee, Member of Capital & Investment Committee, Interim Chief Executive Officer of Arby's Restaurant Group Inc and Interim President of Arby's Restaurant Group Inc

John Barker - Chief Communications Officer and Senior Vice President


Larry Miller - RBC Capital Markets, LLC

John Glass - Morgan Stanley

Phillip Juhan - BMO Capital Markets U.S.

Jason West - Deutsche Bank AG

Mitchell Speiser - Buckingham Research Group, Inc.

John Ivankoe - JP Morgan Chase & Co

Sara Senatore - Sanford C. Bernstein & Co., Inc.

Jeffrey Bernstein - Barclays Capital

Reza Vahabzadeh - Barclays Capital Inc.

Joscelyn MacKay - Morningstar Inc.

Joseph Buckley - BofA Merrill Lynch

Michael Gallo - CL King & Associates, Inc.



Good morning, everyone, and welcome to the Second Quarter 2011 Conference Call for the Wendy's Company. 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 Mr. John Barker. You may begin, sir.

John Barker

Thanks and good morning, everybody. Earlier today, we issued our second quarter 2011 earnings release and we filed our Form 10-Q. The agenda for today's conference call and the webcast will begin with an introduction from our President and CEO, Roland Smith, who will discuss recent events and provide highlights about the second quarter. Our Chief Financial Officer, Steve Hare, will then review our second quarter 2011 financial results and our 2011 outlook. Following Steve's remarks, Roland will discuss Wendy's growth initiatives and he will provide an update on our international expansion, then afterwards we will open up the lines for questions.

Today's conference call and webcast is accompanied by a PowerPoint presentation. You can find it on our Investors Relations page at our corporate website, which is www.aboutwendys.com. For those of you who are listening by phone today, make sure that you select the appropriate webcast player option from our website, and that will ensure that you can sync up with the slides along with our audio.

Now before we begin, I'd 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. Investors should refer to the reconciliations of non-GAAP financial measures to the most directly comparable GAAP financial measure.

Now let me turn the call over to Roland.

Roland Smith

Thanks, John, and good morning, everyone. Before I review the second quarter results, let me give you a brief update on some recent developments. As you know, we completed the sale of Arby's to Roark Capital Group effective July 4, 2011. Following the sale of Arby's, we changed the corporation's name to The Wendy's Company, and all of our human and financial capital will be focused on growing Wendy's. However, there will be a transition period. Based on the transition services agreement with Arby's, we will provide and be reimbursed for support services for 90 days with 30-day extensions available to Arby's through the end of the year.

We also recently announced plans to relocate our corporate headquarters to Dublin, Ohio. The State of Ohio and City of Dublin have offered significant long-term incentives to support this move and renovate our current facility in Dublin. Over the next 2 years, we are planning to transform the Dublin facility into a modern corporate office with significant upgrades to the main entrance, offices and common areas throughout the facility, as well as expanded meeting space for employees and franchisees. We will maintain our Atlanta office but its size will be reduced by approximately 50%. Our Atlanta-based employees will continue to provide support services for the Wendy's brand and our international operations will also remain headquartered in Atlanta.

In conjunction with this Arby's sale and our company's name change, we also launched a new corporate website, aboutwendys.com, which we hope you have had a chance to visit. Now I'd like to review our second quarter results.

In the second quarter, we generated revenue growth of 2.5% to $622 million. This reflects an increase in North America company-owned same-store sales of 2.3%, and importantly, this was driven by an almost 1% increase in transactions. Adjusted EBITDA for the second quarter was $89.4 million, which met our expectations. Compared to last year, these results were negatively impacted by significant commodity increases which affected the entire restaurant industry and also reflect our investment in incremental advertising to introduce Wendy's new breakfast to additional markets.

From a sales perspective, we remain optimistic about the remainder of the year at Wendy's as we continue to focus on our real brand positioning, upgrading our core menu offerings and introducing exciting new products. I'll provide a more detailed update about the initiatives we expect to drive strong sales later on the call, but first I'd like to hear some additional details about second quarter results.

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