Wendy's Q1 Profit Down,to Sell Bakery Operations In Q2; Backs FY15 Adj. EPS View

(RTTNews) - Wendy's Co. (WEN) reported that its net income for the first quarter ended March 29, 2015 dropped to $27.51 million from the prior year's $46.30 million, with earnings per share declining to $0.07 from $0.12 last year.

Revenues for the quarter declined to $466.25 million from $523.20 million in the prior year.

Analysts polled by Thomson Reuters expected the company to report earnings of $0.05 per share and revenues of $475.63 million for the quarter. Analysts' estimates typically exclude special items.

As previously announced, the company plans to reduce its Company-operated restaurant ownership to approximately 5 percent of the total system by the middle of 2016.

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.

The company expects to sell a total of 100 Canadian restaurants before the end of June 2015.

The company announced its intent to sell its bakery operations in Zanesville, Ohio. The Company expects the transaction to close in May 2015.

The Company and its franchisees plan to reimage approximately 450 total Systemwide restaurants and build 80 new restaurants in 2015. This is in addition to the 486 total Systemwide reimages and new restaurants completed or under construction in 2014. The Company plans to reimage at least 60 percent of Wendy's North America Systemwide restaurants by the end of 2020.

The company continues to expect 2015 adjusted earnings per share of $0.33 to $0.35. Analysts expect annual earnings of $0.33 per share.

The Company remains on target for general and administrative expense of approximately $250 million in 2015. Based on its results and current trends in the year to date, the Company now expects Same-restaurant sales growth of 2.5 to 3.0 percent at Company-operated restaurants.

Due to the sale of 640 Company-operated restaurants, the Company expects High single-digit adjusted earnings per share growth in 2016 and 2017, followed by Adjusted Earnings Per Share growth in the mid-to-high teens in 2018.

As previously announced, the Company expects its long-term (2016 and beyond) Adjusted Earnings Per Share growth to improve to approximately 20 percent.

Separately, Wendy's announced its intention to refinance its existing senior secured credit facility.

As of March 29, 2015, the balance of the Company's senior secured credit facility was approximately $1.3 billion. The Company intends to replace the senior secured credit facility with a new securitized financing facility, expected to be comprised of $2.275 billion of senior term notes and $150 million of variable funding notes.

The company noted that it will use the net proceeds of the new facility for repayment of the existing senior secured indebtedness, transaction costs associated with the refinancing, and general corporate purposes, including the return of cash to shareholders.