- Systemwide sales and revenues up 7%, EPS increases 10%
- Same-store sales improve during April at Wendy’s
- CEO Schuessler named Chairman
Wendy’s International, Inc. (NYSE: WEN) announced today its financial results for the first quarter of 2001, which ended on April 1. The Company also announced improving sales trends at Wendy’s® in April, strong results in new store development and progress on its share repurchase program.
- First Quarter Overview
- Systemwide sales grew 7.1% to a record $1.9 billion.
- The Company and its franchisees opened 92 new restaurants systemwide during the quarter, including 52 Wendy’s and 40 Tim Hortons. New restaurant development for the corporation is on track for the year.
- Total revenues increased 7.1% to a record $556 million.
- Same-store sales grew 1.4% at Wendy’s U.S. company restaurants, on top of a 3.5% increase in 2000. Same-store sales at Tim Hortons® restaurants in Canada grew 9.9% on top of a 9.9% increase a year ago. Same-store sales at Tim Hortons restaurants in the U.S. grew 8.6% on top of a 14.8% increase the year before.
- Wendy’s domestic operating margin was 13.8%, which is down from 15.8% in the same quarter a year ago, due primarily to higher costs for beef and utilities as well as higher labor costs as a percent of sales.
- Net income for the quarter increased 7.7% to $38.7 million and diluted EPS were $0.33, up 10% from $0.30 a year ago. The Company previously announced, on March 19, that it expected first quarter EPS of $0.33.
- The Company purchased 700,000 shares of Wendy’s common stock in the quarter for $14.9 million. Year to date, through May 1, the Company purchased a total of 1.15 million shares for $25.3 million. Since initiating a share repurchase program in 1998, the Company has bought a total of 22.5 million shares for $506 million.
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Chairman and Chief Executive Officer Jack Schuessler said: “We delivered a solid performance in what was a difficult quarter for many companies. It was a good illustration of the importance of Tim Hortons to our corporate performance. Tim Hortons had an outstanding quarter while Wendy’s focused on overcoming the impact from severe winter weather in the U.S. during January and early February and deep discounting within the quick-service restaurant industry. We also faced the impact of foreign currency translation, due to the weaker Canadian dollar.
“We are optimistic about the remainder of 2001,” Schuessler said. “Our Wendy’s U.S. business is improving and Tim Hortons continues to perform above our expectations.
Tim Hortons continues outstanding performance
Paul House, president and chief operating officer of Tim Hortons, said: “Our team delivered another remarkable quarter with very strong same-store sales growth in Canada and the United States. In Canada, we are leveraging Tim Hortons’ leading brand position with our ‘Always Fresh(TM)’ coffee and baked goods.
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By GlobalData“We continue to focus on new products such as our coffee cake and ‘Tim’s Own®’ soups and sandwiches, as well as successful promotions such as our recent ‘Roll Up The Rim to Win®’ campaign, House said.
“In the U.S., we continue to penetrate our core markets of upper New York, Ohio, Michigan and West Virginia,” said House. “Coffee sales at Tim Hortons continue to increase, consumer loyalty is improving and we are on track with our U.S. plan to generate profits and improved return on capital.”
April sales trends improving at Wendy’s
For April, preliminary same-store sales were up in the 3% to 3.5% range at Wendy’s U.S. company restaurants, on top of a 3.0% increase in 2000. The April accounting period ends on May 6. Same-store sales at Tim Hortons restaurants in Canada were up in the 7% to 8% range in April on top of a 7.3% increase a year ago.
“Our Wendy’s business is building momentum. Our March same-store sales were stronger than either of the first two months and we are pleased with the improving trend in April,” said Tom Mueller, president and chief operating officer of Wendy’s North America. “Our new ‘Garden Sensations(TM)’ salad test is very promising, Service Excellence® continues to deliver results and we are optimistic about our ‘Late Night(TM)’ campaign for 2001.”
Schuessler named Chairman
The Board of Directors named Jack Schuessler as the Company’s Chairman and Chief Executive Officer during its meeting on May 1, effective immediately. Schuessler was previously CEO and President.
“The promotion reflects the outstanding leadership Jack has displayed since being named our CEO in March of 2000,” said Wendy’s Founder and Senior Chairman Dave Thomas. “He has done a great job organizing a talented executive team and he has emphasized the core values of our company – quality food, superior restaurant operations, excellent relationships with franchisees and great customer service – as well as the concept of continuous improvement throughout the entire organization.
“Jack, along with our Chief Financial Officer Kerrii Anderson, has also directed the development of a corporate strategic plan focused on profitable growth and shareholder value,” Thomas said. “I am optimistic about the future of the Company and so are all of the directors.”
Schuessler, a 26-year company veteran, was named to the board in 2000. Before being named CEO, he had been President and Chief Operating Officer of Wendy’s U.S.
Quarterly dividend approved
The Board of Directors approved a quarterly dividend of 6 cents per share, payable on May 25 to shareholders of record as of May 14. It will be the Company’s 93rd consecutive dividend payment to shareholders.
Wendy’s International, Inc. is one of the world’s largest restaurant operating and franchising companies, with $7.7 billion in 2000 systemwide sales and two quality brands – Wendy’s and Tim Hortons. Wendy’s Old Fashioned Hamburgers® was founded in 1969 by Dave Thomas and is the third largest quick-service hamburger chain in the world with more than 5,800 restaurants in the United States, Canada and international markets. Tim Hortons was founded in 1964 by Tim Horton and Ron Joyce and is the largest coffee and fresh baked goods chain in Canada. There are more than 2,000 Tim Hortons restaurants of which nearly 1,900 are in Canada.
WENDY’S INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data – Unaudited)
First Quarter Ended
04/01/2001 04/02/2000
REVENUES
Retail sales $449,603 $422,325
Franchise revenues 105,935 96,247
Total 555,538 518,572
COSTS & EXPENSES
Cost of sales 288,502 267,587
Company restaurant operating costs 98,409 91,216
Operating costs 21,029 18,801
General & administrative expenses 53,761 50,998
Depreciation & amortization
of property & equipment 28,706 25,837
Other (income) expense (531) 3,198
Interest, net 4,236 3,456
Total 494,112 461,093
INCOME BEFORE INCOME TAXES 61,426 57,479
INCOME TAXES 22,727 21,554
NET INCOME $38,699 $35,925
Basic earnings per common share $0.34 $0.31
Diluted earnings per common share $0.33 $0.30
Basic shares 114,341 116,398
Diluted shares 123,116 124,269
WENDY’S INTERNATIONAL, INC.
Safe Harbor Under the Private Securities Litigation Reform Act of 1995
The Private Securities Litigation Reform Act of 1995 (the “Act”) provides a “safe harbor” for forward-looking statements to encourage companies to provide prospective information, so long as those statements are identified as forward-looking and are accompanied by meaningful cautionary statements identifying important factors that could cause actual results to differ materially from those discussed in the statement. Wendy’s International, Inc. (the “Company”) desires to take advantage of the “safe harbor” provisions of the Act.
Certain information in this news release, particularly information regarding future economic performance and finances, and plans, expectations and objectives of management, is forward looking. The following factors, in addition to other possible factors not listed, could affect the Company’s actual results and cause such results to differ materially from those expressed in forward-looking statements:
Competition. The quick-service restaurant industry is intensely competitive with respect to price, service, location, personnel and type and quality of food. The Company and its franchisees compete with international, regional and local organizations primarily through the quality, variety and value perception of food products offered. The number and location of units, quality and speed of service, attractiveness of facilities, effectiveness of advertising and marketing programs, and new product development by the Company and its competitors are also important factors. The Company anticipates that intense competition will continue to focus on pricing. Certain of the Company’s competitors have substantially larger marketing budgets.
Economic, Market and Other Conditions. The quick-service restaurant industry is affected by changes in international, national, regional, and local economic conditions, consumer preferences and spending patterns, demographic trends, consumer perceptions of food safety, weather, traffic patterns and the type, number and location of competing restaurants. Factors such as inflation, food costs, labor and benefit costs, legal claims, and the availability of management and hourly employees also affect restaurant operations and administrative expenses. The ability of the Company and its franchisees to finance new restaurant development, improvements and additions to existing restaurants, and the acquisition of restaurants from, and sale of restaurants to franchisees is affected by economic conditions, including interest rates and other government policies impacting land and construction costs and the cost and availability of borrowed funds.
Importance of Locations. The success of Company and franchised restaurants is dependent in substantial part on location. There can be no assurance that current locations will continue to be attractive, as demographic patterns change. It is possible the neighborhood or economic conditions where restaurants are located could decline in the future, thus resulting in potentially reduced sales in those locations.
Government Regulation. The Company and its franchisees are subject to various federal, state, and local laws affecting their business. The development and operation of restaurants depend to a significant extent on the selection and acquisition of suitable sites, which are subject to zoning, land use, environmental, traffic, and other regulations. Restaurant operations are also subject to licensing and regulation by state and local departments relating to health, sanitation and safety standards, federal and state labor laws (including applicable minimum wage requirements, overtime, working and safety conditions, and citizenship requirements), federal and state laws which prohibit discrimination and other laws regulating the design and operation of facilities, such as the Americans with Disabilities Act of 1990. Changes in these laws and regulations, particularly increases in applicable minimum wages, may adversely affect financial results. The operation of the Company’s franchisee system is also subject to regulation enacted by a number of states and rules promulgated by the Federal Trade Commission. The Company cannot predict the effect on its operations, particularly on its relationship with franchisees, of the future enactment of additional legislation regulating the franchise relationship.
Growth Plans. The Company plans to increase the number of systemwide Wendy’s and Tim Hortons restaurants open or under construction. There can be no assurance that the Company or its franchisees will be able to achieve growth objectives or that new restaurants opened or acquired will be profitable.
The opening and success of restaurants depends on various factors, including the identification and availability of suitable and economically viable locations, sales levels at existing restaurants, the negotiation of acceptable lease or purchase terms for new locations, permitting and regulatory compliance, the ability to meet construction schedules, the financial and other development capabilities of franchisees, the ability of the Company to hire and train qualified management personnel, and general economic and business conditions.
International Operations. The Company’s business outside of the United States is subject to a number of additional factors, including international economic and political conditions, differing cultures and consumer preferences, currency regulations and fluctuations, diverse government regulations and tax systems, uncertain or differing interpretations of rights and obligations in connection with international franchise agreements and the collection of royalties from international franchisees, the availability and cost of land and construction costs, and the availability of experienced management, appropriate franchisees, and joint venture partners. Although the Company believes it has developed the support structure required for international growth, there is no assurance that such growth will occur or that international operations will be profitable.
Disposition of Restaurants. The disposition of company operated restaurants to new or existing franchisees is part of the Company’s strategy to develop the overall health of the system by acquiring restaurants from, and disposing of restaurants to, franchisees where prudent. The realization of gains from future dispositions of restaurants depends in part on the ability of the Company to complete disposition transactions on acceptable terms.
Transactions to Improve Return on Investment. The sale of real estate previously leased to franchisees is generally part of the program to improve the Company’s return on invested capital. There are various reasons why the program might be unsuccessful, including changes in economic, credit market, real estate market or other conditions, and the ability of the Company to complete sale transactions on acceptable terms and at or near the prices estimated as attainable by the Company.
Joint Venture to Manufacture and Distribute Par-Baked Products for Tim Hortons Restaurants. The success of the joint venture to manufacture and distribute par-baked products for Tim Hortons restaurants could be affected by a number of factors, including many of the factors set forth above. In addition, the ability of the joint venture to acquire real estate and construct and equip a manufacturing plant on acceptable terms, the realization of expected levels of production efficiencies, and actual product distribution costs and costs incurred to equip Tim Hortons restaurants for par-baked products occurring within expected ranges, could affect actual results.
Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date thereof. The Company undertakes no obligation to publicly release any revisions to the forward-looking statements contained in this release, or to update them to reflect events or circumstances occurring after the date of this release, or to reflect the occurrence of unanticipated events.
