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Wendy's consolidated revenues down 10.9 percent

Staff writer |
The Wendy's company reported unaudited results for the first quarter ended March 29, 2015. Same-restaurant sales increased 2.6 percent at North America company-operated restaurants.

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Same-restaurant sales increased 3.4 percent at North America franchise-operated restaurants.

Systemwide same-restaurant sales increased 3.2 percent during the first quarter of 2015. Higher sales at reimaged Image Activation restaurants contributed approximately 150 basis points to company-operated same-restaurant sales results, primarily from increased customer counts.

Consolidated revenues were $466.2 million in the first quarter of 2015, compared to $523.2 million in the first quarter of 2014.

The 10.9 percent decrease resulted from the ownership of 240 fewer company-operated restaurants at the end of the 2015 first quarter compared to the end of the 2013 fourth quarter, along with lower technical assistance fees attributable to a year-over-year reduction in the number of company-operated restaurants sold.

Partly offsetting this decrease were higher same-restaurant sales and increased rent and royalty revenue.

North America company-operated restaurant margin was 14.7 percent in the first quarter of 2015, compared to 13.1 percent in the first quarter of 2014.

General and administrative expense was $60.3 million in the first quarter of 2015, compared to $70.4 million in the first quarter of 2014. The 14.3 percent decrease resulted primarily from cost savings related to the company's system optimization initiative and 2014 resource realignment, along with lower equity compensation expense.

Adjusted EBITDA was $84.0 million in the first quarter of 2015, an 11.6 percent increase compared to first-quarter 2014 Adjusted EBITDA of $75.3 million. The 2014 results exclude $12.0 million in pretax gains, primarily from the sale of restaurants previously not included in the company's system optimization initiative.

Adjusted EBITDA margin was 18.0 percent in the first quarter of 2015 compared to 14.4 percent in the first quarter of 2014. The 360-basis-point improvement reflects the positive impact of the first phase of the company's system optimization initiative, including increased royalties and rental income, along with a reduction in G&A expense.

Operating profit was $52.3 million in the first quarter of 2015, compared to $89.0 million in the first quarter of 2014.

The 41.2 percent decrease resulted primarily from year-over year reductions in gains on the sale of company-operated restaurants, partly offset by a reduction in costs related to the company's system optimization initiative and a reduction to cost of sales of $12.5 million as a result of the reversal of a liability associated with the bakery's withdrawal from a multi-employer pension plan related to the company's planned sale of its bakery operations.

Also offsetting the decrease in operating profit was a reduction in G&A expense.

Operating profit margin was 11.2 percent in the first quarter of 2015 compared to 17 percent in the first quarter of 2014. The 580 basis-point decrease resulted primarily from year-over year reductions in gains on the sale of company-operated restaurants, partly offset by the items described above in "operating profit."

Net income was $27.5 million in the first quarter of 2015, compared to $46.3 million in the first quarter of 2014. The 40.6 percent decrease resulted primarily from year-over year reductions in gains on the sale of company-operated restaurants, partly offset by the items described above in "operating profit," as well as an 870-basis-point year-over-year decrease in the company's effective tax rate.

Adjusted Earnings Per Share were $0.06 in the first quarter of 2015, compared to $0.05 in the first quarter of 2014. The 2014 results exclude certain gains, primarily from the sale of restaurants previously not included in the company's system optimization initiative.

Based on an analysis of its North America restaurant base, the Company now intends to sell a total of approximately 380 restaurants in 2015 (including the previously announced sale of 100 Canadian restaurants) and approximately 260 restaurants in 2016, for a total of approximately 640 restaurants.

Reported diluted earnings per share were $0.07 in the first quarter of 2015, compared to $0.12 in the first quarter of 2014. The decrease resulted primarily from year-over year reductions in gains on the sale of company-operated restaurants.


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