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The Wendy's Company Message Board

  • insideview50 insideview50 Jun 2, 2010 6:21 PM Flag

    Where's Peter Brady when we need him?

    I've been reading Wendy's posts for 2 year now. Most have them are a waste of time but Mr. Brady's insights have always been informative and useful for my inside view of Wendy's. I pulled this from a Seeking Alpha blog:
    "As of their most recent 10-Q, WEN was standing at an S&P credit rating of B+, by technical definition a highly speculative non-investment grade. Ironically, they have also been participating in a share buy back plan and at their 2010 shareholder's meeting they just approved another $75 million, bringing the total up to $325 million. Why a company with a terrible debt rating (which is also responsible for the crippling debt payments that are destroying the company) is buying back shares in addition to posting a dividend when they are making operating losses is a mystery to me, and if I was holding their debt I would be incredibly mad."
    http://seekingalpha.com/article/207632-wendys-arbys-group-struggling-giant-on-the-rise-or-a-falling-knife
    What do you think Peter? Is the stock buy back combined with the dividend payout a way for Trian to suck money out of a company that should be reinvesting in restaurant renovation and marketing?

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    • Part II - III
      It seems, in fact, that Wendy's has immense pontential as Bill has indicated. Let me emphasize that it "has potential".
      It also seems to be a fact to me and, also probably to Ackman, that this management team does not have a clue as to how to unlock Wendy's potential and that if it did, such potential would be released at no time in the near future. This is unfortunate but true and why Ackman, who is probably much smarter than this poster and whose analysis, formally drafted by experts, is much more detailed and dependable than the one statistic indicator provided by this zealous poster, has sold off.
      Let me quickly address this poster's claim that the borrowed money could easily be repaid by the sales of Arby's. I think every former Wendy's shareholder would be ecstatic regarding the possibility of selling Arby's for several hundred million dollars and being the recipient of the sales proceeds. That chain is exactly that - a ball and chain around the ankles of Wendy's shareholders.
      However, that supposition suggests Arby's is worth several hundred million dollars and that Peltz intends to sell it and then remit the proceeds to Wendy's shareholders. The possibility of that happening, given all the facts and circumstances surrounding Wendy's/Arby's, is so divorced from reality as to not be worthy of any serious consideration. Following this posters line of logic, wouldn't it have been a lot better if Wendy's did not borrow the $500 million and just sold Arby's for $400 million plus and gave the proceeds to Wendy's shareholders. Then you wouldn't have any debt, you would have more than $400 million in cash and you would no longer be saddled with Arby's. Wow! That's a much better dream. But a dream it is.

      It is for some of the reasons stated above that this poster and most other posters are, as you say it, "a waste of time."

      Peter

    • Part II II
      In any event, he challenges you to analyze the balance sheet from one who knows.

      Let me help him along on his quest for reliable analysis. Not so long ago Bill Ackman (remember him?) published a very comprehensive power-point financial analysis on Wendy's which is available if you look for it. (I'm not even sure this poster knows who Bill Ackman is). I believe it was posted on the yahoo message board a while back. Unfortunately for this poster I don't believe Ackman consulted with the Church of Scientology for his analysis, but it is nevertheless, a very good financial analysis which was put together by his highly regarded team and it remarkably uses more than one statistic to arrive at its conclusions.
      In any event, Bill made out his case via the balance sheet and other financial statements why Wendy's was a superb buy. Yet six months later he completely sold off his position. All of it. Now why id he do that?

    • Part II

      If you have been around this board for a couple of years, then you are aware of what usually and unfortunately happens here. New posters full of unending zeal and energy arrive or, should I say charge forward, with their various opinions and theories as to how Wendy's is grossly undervalued and why it is immenent to double and triple (quadruple!) in price. The excess energy and zeal of these prodigious posters inspires them to sometimes post daily or even several times a day, subjecting the unlucky readers to these unending rants, re-enforcing a future soon to be filled with financial bliss and security. However, after several months of wondrus predictions, through the exercise more of their fingers than their brains, they usually go quietly into the night never to be seen again, giving the readers some respite until another zealot charges forth. Let's look at the respondee at hand.
      He has predicted that Wendy's may soon reach $20 per share - see his May 5th post " Wendy's stock will at least hit $14.00 a share in 2010 and perhaps even $20.00". He proffers as proof a one "per unit" statistic, as if he has uncovered the true secret of Wendy's. Eat your heart out Indiana Jones! The true mystery is solved! Anyway, I think he must have gotten this secret way of analyzing the worth of Wendy's from the Church of Scientology, as I can not fathom why he fails to use the old and trusted benchmarks of EPS, cash flow, PE ratios and most importantly growth rates of same store sales.

    • IV
      Individually, I think the dividend is tantamount to an amazing waste of money. But collectively it is more than $25 million. If used intelligently and collectively, this $25 million could be very effective and powerful in fueling an international expansion plan or funding restaurant renovation and marketing as necessary.
      So to answer your question, I believe both the $500 million debt taken and the $25 million annual dividend payment are a complete misuse of funds which not only do not give any benefit to Wendy's but are detrimental to the company.

      In any event, thanks for the kind words Investorview.

      Peter

    • III
      Peltz himself does everything with others' money. He never uses his own. If a company he establishes or buys makes money, Peltz makes a lot of money. If the company loses money, Peltz only makes a little money (salaries, dividends, etc.) If the same company makes money, the stockholders make money. If the company loses money, the stockholders are skrewed. He always effectively transfers all the risk away from himself.
      The dividend is another issue. This 1.5c per quarter is a total waste of funds. It is basically meaningless to the recipient (except Trian). Anyone dependant on dividend income should and can easily invest in a safe company yielding 4-5%. The probable reason for this wasteful payment is that it diverts several million dollars to Trian and thuslt Trian can use it to pay for all its operating costs and overhead (salaries, rent, etc.)

    • For the life of me I don't understand why they borrowed the $500 million. At first they said they were going to use it for general corporate purposes. Later they said they were going to use it for general corporate purposes. Later said they were going to use it for a possible acquisition. News reports said Peltz was looking at Dunkin Donuts. After that didn't pan out, the money seemed to be burning a hole in their pockets and Wendy's decided to use it for a share buyback.
      The unnecessary debt does a lot of damage to Wendy's balance sheet and if I were a debt holder this uncalled for additional debt would also get me angry.

    • Have computer problem. will post when fixed.
      thanks
      Peter

    • "What do you think, Peter?

    • wendy's has far more equity per share than burger king,look at a reliable source to see the balance sheet...........and if wendy's sold arby's imo. wendy's would have very little debt if any

 
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