The Wendy’s company reported unaudited results for the third quarter ended September 27, 2015. Same-restaurant sales increased 3.1 percent at North America system restaurants in the third quarter of 2015.
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Same-restaurant sales increased 3.3 percent at North America franchise-
operated restaurants. Same-restaurant sales increased 1.7 percent at North America company-operated restaurants.
On a two-year basis, third-quarter 2015 same-restaurant sales increased 3.8 percent for the North America system, 3.8 percent at North America franchise-operated restaurants and 3.7 percent at North America company-operated restaurants.
Revenues were $464.6 million in the third quarter of 2015, compared to $496.7 million in the third quarter of 2014. The 6.5 percent decrease resulted primarily from the ownership of 153 fewer company-operated restaurants at the end of the 2015 third quarter compared to the beginning of the 2014 third quarter. Franchise revenues were $105.6 million in the third quarter of 2015 compared to $103.2 million in the third quarter of 2014.
The 2.3 percent increase resulted from higher royalty revenue, franchise fees and rent income primarily as a result of the company’s system optimization initiative.
North America company-operated restaurant margin was 18.8 percent in the third quarter of 2015, compared to 15.5 percent in the third quarter of 2014. The 330 basis-point increase was the result of higher same-restaurant sales, the positive impact from the company’s Image Activation reimaging program and lower commodity costs.
General and administrative expense was $63.7 million in the third quarter of 2015, compared to $65.2 million in the third quarter of 2014. The 2.3 percent decrease resulted primarily from lower share-based compensation expense partly offset by higher incentive compensation.
The decrease also reflects the positive impact of the company’s system optimization initiative and resource realignment plan announced in 2014.
Adjusted EBITDA from continuing operations was $99.7 million in the third quarter of 2015, an 11.4 percent increase compared to $89.5 million in the third quarter of 2014, despite the ownership of 153 fewer company-operated restaurants at the end of the 2015 third quarter compared to the beginning of the 2014 third quarter.
Adjusted EBITDA margin was 21.5 percent in the third quarter of 2015 compared to 18.0 percent in the third quarter of 2014. The 350-basis-point improvement reflects the positive impact of the second phase of the company’s system optimization initiative.
Operating profit was $55.9 million in the third quarter of 2015, compared to $44.2 million in the third quarter of 2014. The 26.5 percent increase resulted primarily from a year-over-year reduction in impairment charges and the significant increase in restaurant operating margin.
Operating profit margin was 12.0 percent in the third quarter of 2015 compared to 8.9 percentin the third quarter of 2014, an improvement of 310 basis-points.
Interest expense was $27.9 million in the third quarter of 2015, compared to $13.1 million in the third quarter of 2014. The increase resulted primarily from higher total debt levels related to the company’s recent debt refinancing.
Income from continuing operations was $8.3 million in the third quarter of 2015 compared to $21.1 million in the third quarter of 2014. The reduction is primarily the result of higher interest expense, along with a higher effective tax rate of 70.5 percent in the third quarter of 2015, compared to 32.8 percent in the third quarter of 2014.
The higher tax rate is primarily the result of the effect of changes to valuation allowances on state net operating loss carryforwards related to the company’s system optimization initiative. ■