Meat Industry INSIGHTS Newsletter

990702 Wendy's 2nd Quarter Above Expectations

July 9, 1999

Dublin, OH - Wendy's International, Inc. announced that sales for the second quarter, which ended on July 4, 1999, were stronger than expected.

Average unit volumes (AUVs) at Wendy's company restaurants in the United States increased about 10% and have increased for 38 consecutive months. Same- store sales at Wendy's company units in the U.S. were up about 8%. Tim Hortons' same-store sales in Canada were up about 10%.

Management expects the robust sales and cost controls to produce better than planned second quarter earnings. On a preliminary basis, total diluted earnings per share for the second quarter are expected to be $0.39, a 15% increase from $0.34 reported a year ago. Total diluted EPS for the quarter is expected to include about $0.04 in asset gains from the sale of real estate, franchising and fees, compared to $0.02 in asset gains in the same quarter a year ago.

Base EPS (total diluted EPS less asset gains) is expected to be $0.35 for the quarter, up about 21% from $0.29 in the same 13-week quarter a year ago. The reported Total EPS results for the second quarter a year ago included 14 weeks and $0.03 in EPS from the extra accounting week (see chart below).

Due to the strong results year to date, management is raising its Base EPS growth goal for 1999 to a range of 18% to 21%, up from a previous range of 16% to 18%. Base EPS was $1.03 in 1998 excluding non-recurring charges. Total EPS for 1999 is expected to include a total of $0.06 to $0.07 in asset gains.

“We are encouraged with the overall progress at Wendy's and Tim Hortons and our ability to build on the positive momentum from the past two quarters,” said Chairman, CEO and President Gordon F. Teter. “Our performance is attributable to improving restaurant operations, offering customers an array of quality products and executing effective marketing strategies. At the same time, we have made significant progress on long-term strategies to improve shareholder return.”

The Company continued to emphasize quality products and balanced marketing during the second quarter. Customers responded favorably during the quarter to Wendy's “Cheddar Lovers' Bacon Cheeseburger” and Super Value Menu promotions and the systemwide introduction of an iced cappuccino drink at Tim Hortons.

In addition, Wendy's Service Excellence program is being expanded from the Western U.S. region to the rest of the U.S. and Canada.

“Service Excellence has delivered significant incremental sales gains and improved speed of service at our pick-up windows in the Western region,” said Teter. “We look forward to the positive sales and service impact in our other regions as we extend the program to company and franchise stores throughout North America.”

Domestic margins continued to improve in the second quarter, up an estimated 100 to 120 basis points from 16.6% a year ago, due to the strong sales and effective store-level productivity initiatives.

“This will be the highest quarterly domestic margin at Wendy's in the past 10 years,” said Chief Financial Officer Frederick R. Reed. “It is encouraging to deliver the margin expansion considering that store-level crew wages continue to be under pressure (up about 5.5% in the quarter compared to a year ago) due to the strong U.S. economy and delivered food costs were slightly higher than expected.

“The margin performance is an important part of our strategic initiatives to improve return on invested capital,” said Reed. “Our progress also includes repurchasing common shares and substantially completing our program to refinance with third-party lenders notes receivable held by the Company.”

Wendy's International, Inc. is one of the world's largest restaurant operating and franchising companies with $6.5 billion in systemwide sales during 1998. Wendy's Old Fashioned Hamburgers was founded in 1969 by Dave Thomas and is the third-largest quick-service hamburger restaurant chain with more than 5,300 units in the United States, Canada and other international markets. Tim Hortons was founded in 1964 by Tim Horton and Ron Joyce and is the largest coffee and baked goods restaurant chain in Canada. There are more than 1,700 Tim Hortons restaurants in North America.

This Article Compliments of...

Connex Technology Inc.

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