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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
(X) ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 (FEE REQUIRED)
For the Fiscal Year Ended January 1, 1995
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( ) TRANSITIONAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from __________ to __________
Commission File Number: 1-8116
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WENDY'S INTERNATIONAL, INC.
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(Exact name of Registrant as specified in its charter)
Ohio 31-0785108
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
P.O. Box 256, 4288 West Dublin-Granville Road, Dublin, Ohio 43017-0256
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(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code 614-764-3100
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Securities registered pursuant to Section 12(b) of the Act:
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Title of each class Name of each exchange on which registered
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Common Shares, $.10 stated value New York, Boston, Cincinnati, Midwest,
(101,848,000 shares outstanding Pacific, and Philadelphia
at March 6, 1995) Stock Exchanges
7% Convertible Subordinated
Debentures, due 2006 New York Stock Exchange
Preferred Stock Purchase Rights New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
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Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days. YES X NO .
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. X
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The aggregate market value of the voting stock held by non-affiliates of the
Registrant at March 6, 1995 was $1,508,098,000.
Documents incorporated by reference:
Portions of the Definitive Proxy Statement dated March 8, 1995 are
incorporated by reference into Part III.
Exhibit index on pages 30 and 31.
1 of 52
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PART I
ITEM 1. BUSINESS
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THE COMPANY
Wendy's International, Inc. was incorporated in 1969 under the laws of the
State of Ohio. Wendy's International, Inc. and its subsidiaries are
collectively referred to herein as the "Company."
The Company is primarily engaged in the business of operating, developing,
and franchising a system of distinctive quick-service restaurants. At
January 1, 1995, there were 4,411 Wendy's restaurants in operation in the
United States and in 33 other countries and territories. Of these
restaurants, 1,264 were operated by the Company and 3,147 by the Company's
franchisees.
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OPERATIONS
Each Wendy's restaurant offers a relatively standard menu featuring
hamburgers and filet of chicken breast sandwiches, which are prepared to
order with the customer's choice of condiments. Wendy's menu also includes
a salad bar, chili, baked and french fried potatoes, prepared salads,
desserts, soft drinks and other non-alcoholic beverages, and a child's
meal. In addition, the restaurants sell a variety of promotional products
on a limited basis.
The Company strives to maintain quality and uniformity throughout all
Wendy's restaurants by publishing detailed specifications for food
products, preparation, and service by continual in-service training of
employees, and by field visits from Company supervisors. In the case of
franchisees, field visits are made by Company personnel who review
operations and make recommendations to assist in compliance with Company
specifications.
Generally, the Company does not sell food or supplies to its franchisees.
However, the Company has arranged for volume purchases of many of these
products. Under the purchasing arrangements, independent distributors
purchase certain products directly from approved suppliers, and store and
sell them to local Company and franchised restaurants. These programs help
assure availability of products and provide quantity discounts, quality
control, and efficient distribution. These advantages are available both to
the Company and to any franchisees who choose to participate in the
distribution program.
The New Bakery Co. of Ohio, Inc., (Bakery) a wholly-owned subsidiary of the
Company, is a producer of buns for Wendy's restaurants. At January 1, 1995,
the Bakery supplied 652 restaurants operated by the Company and 1,136
restaurants operated by franchisees. At the present time, the Bakery does
not manufacture or sell any other products.
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RAW MATERIALS
The Company and its franchisees have not experienced any material shortages
of food, equipment, fixtures, or other products which are necessary to
restaurant operations. The Company anticipates no such shortages of
products and, in any event, alternate suppliers are available.
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TRADEMARKS AND SERVICE MARKS OF THE COMPANY
The Company has registered certain trademarks and service marks in the
United States Patent and Trademark office and in international
jurisdictions, some of which include "Wendy's", "Wendy", "Old Fashioned
Hamburgers", and "Quality Is Our Recipe". The Company believes that these
and other related marks are of material importance to the Company's
business. Domestic trademarks and service marks expire at various times
from 1995 to 2009, while international trademarks and service marks have
various durations of 5 to 20 years. The Company generally intends to renew
trademarks and service marks which expire.
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SEASONALITY
The Company's business is moderately seasonal. Average restaurant sales are
normally higher during the summer months than during the winter months.
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WORKING CAPITAL PRACTICES
Cash from operations, cash and short-term investments on hand, and possible
asset dispositions should enable the Company to meet its financing
requirements. In addition, the Company has available unused lines of credit
and has filed a $200 million shelf registration. It is a normal practice
within the quick-service restaurant industry to maintain a relatively low
current ratio.
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COMPETITION
Wendy's is one of the largest food service organizations in the world. Each
Company and franchised restaurant is in competition with other food service
operations within the same geographical area. The quick-service restaurant
industry is highly competitive. The Company competes with other
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, and effectiveness of
marketing are also important factors. The price charged for each menu item
may vary from market to market depending on competitive pricing and the
local cost structure.
The Company's competitive position is enhanced by its use of fresh ground
beef, its unique and diverse menu, promotional products, its wide choice of
condiments, and the atmosphere and decor of its restaurants.
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RESEARCH AND DEVELOPMENT
The Company engages in research and development on an ongoing basis,
testing new products and procedures for possible introduction into the
Wendy's system. While research and development operations are considered to
be of prime importance to the Company, amounts expended for these
activities are not deemed material.
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GOVERNMENT REGULATIONS
A number of states have enacted legislation which, together with rules
promulgated by the Federal Trade Commission, affect companies involved in
franchising. Much of the legislation and rules adopted have been aimed at
requiring detailed disclosure to a prospective franchisee and periodic
registration by the franchisor with state administrative agencies.
Additionally, some states have enacted, and others have considered,
legislation which governs the termination or non-renewal of a franchise
agreement and other aspects of the franchise relationship. The United
States Congress has also considered legislation of this nature. The Company
has complied with requirements of this type in all applicable
jurisdictions. The Company cannot predict the effect on its operations,
particularly on its relationship with franchisees, of future enactment of
additional legislation. Various other government initiatives such as
minimum wage rates and taxes can all have a significant impact on the
Company's performance.
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ENVIRONMENT AND ENERGY
Various federal, state, and local regulations have been adopted which
affect the discharge of materials into the environment or which otherwise
relate to the protection of the environment. The Company does not believe
that such regulations will have a material effect on its capital
expenditures, earnings, or competitive position. The Company cannot predict
the effect of future environmental legislation or regulations.
The Company's principal sources of energy for its operations are
electricity and natural gas. To date, the supply of energy available to the
Company has been sufficient to maintain normal operations.
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ACQUISITIONS AND DISPOSITIONS
The Company has from time to time acquired the interests of and sold
restaurants to franchisees, and it is anticipated that the Company may have
opportunities for such transactions in the future. The Company generally
retains a right of first refusal in connection with any proposed sale of a
franchisee's interest. The Company will continue to sell and acquire
restaurants in the future where prudent.
See Notes 6 and 7 under Item 8 on page 23 of this Form 10-K for further
information regarding acquisitions and dispositions.
3
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INTERNATIONAL OPERATIONS
Markets in Canada are currently being developed for both company-owned and
franchised restaurants. In addition to the countries and territories listed
under Item 2 on page 6 of this Form 10-K, the Company has granted
development rights for Bahrain, Egypt, Morocco, Qatar, Tunisia, and the
Yemen Arab Republic.
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FRANCHISED WENDY'S RESTAURANTS
As of January 1, 1995, the Company's franchisees operated 3,147 Wendy's
restaurants in 49 states, the District of Columbia, and 33 other countries
and territories.
The rights and franchises under which most franchised restaurants in the
United States are operated are set forth in one basic document, the
Restaurant Franchise Agreement. This document gives the franchisee the
right to construct, own, and operate a Wendy's restaurant upon a site
accepted by Wendy's and to use the Wendy's system in connection with the
operation of the restaurant at that site. The Company will use a revised
form of agreement, the Wendy's Unit Franchise Agreement, for new franchised
restaurants operated in the United States beginning in 1995.
Wendy's has in the past franchised under different agreements on a
multi-unit basis; however, now it is generally the intent of the Company to
grant new franchises both in the United States and foreign countries on a
unit-by-unit basis.
After having submitted to Wendy's the requested application and financial
materials, if initially approved by Wendy's, an individual becomes an
approved applicant upon the execution of a Preliminary Letter Agreement.
This Preliminary Letter Agreement does not guarantee that the applicant
will be accepted as a Wendy's franchisee but entitles the applicant to
commence a training program, intended to allow both parties the opportunity
to more carefully assess a long-term franchise relationship. For existing
franchisees who in Wendy's opinion are not in need of additional training,
the Preliminary Letter Agreement may not be necessary. Upon the execution
of a Preliminary Letter Agreement, the applicant is required to pay a
non-refundable fee of $5,000 to help defray the cost of the approval
process and the initial training.
Both the Restaurant Franchise Agreement and the Wendy's Unit Franchise
Agreement require that the franchisee pay a royalty of 4% of gross receipts
from the operation of the restaurant. Both Agreements also typically
require that the franchisee pay the Company a technical assistance fee. In
the United States, the technical assistance fee required under newly
executed Wendy's Unit Franchise Agreements is currently $25,000 for each
restaurant.
The technical assistance fee is used to defray the cost to the Company of
providing to its franchisees site selection assistance, standard
construction plans, specifications and layouts, review of specific
restaurant site plans, certain training in the Company's restaurant
systems, and certain bulletins, brochures, and reports. The Company does
not select or employ personnel on behalf of the franchisees.
The rights and franchises currently offered for international development
are contained in the Franchise Agreement which is issued upon approval of a
restaurant site. The Franchise Agreement is for an initial term of 20 years
or the term of the lease for the restaurant site, whichever is shorter. The
Franchise Agreement licenses the franchisee to use the Company's trademarks
and know-how in the operation of the restaurant. Upon execution of the
Franchise Agreement, the franchisee is required to pay a technical
assistance fee. Generally, the technical assistance fee is $30,000 for each
restaurant. Currently, the franchisee is required to pay a monthly net
continuing fee based on the gross sales of the restaurant, usually 4%.
See Schedule II on page 29 of this Form 10-K, and Management's Discussion
and Analysis of Financial Condition and Results of Operations under Item 7
on pages 11 through 14 and Note 8 under Item 8 on page 23 of this Form
10-K for further information regarding reserves, commitments, and
contingencies involving franchisees.
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ADVERTISING AND PROMOTIONS
Products sold by Wendy's restaurants are advertised through television,
radio, newspapers, and a variety of promotional campaigns. The Company
attempts to keep franchisees informed of current advertising techniques and
effective promotions. The Company's advertising materials are also made
available to the franchisees. Both the Restaurant Franchise Agreement and
the Wendy's Unit Franchise Agreement provide that franchisees will spend 4%
of their gross receipts for advertising and promotions. The Restaurant
Franchise Agreement specifies 2% is to be spent on local and regional
advertising (including in many cases cooperative advertising), and 2% is
the required contribution to The Wendy's National Advertising Program, Inc.
(WNAP). Under the Restaurant Franchise Agreement the
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Company has the ability to increase the required local and regional
expenditures to 3%, for a total of 5% for advertising and promotions,
subject to certain conditions.
The Company has the ability under the Wendy's Unit Franchise Agreement to
specify and to change the 4% advertising and promotions allocation subject
to certain restrictions. Currently, the Company requires franchisees under
the Wendy's Unit Franchise Agreement to allocate 2% to local and regional
advertising and promotions and 2% to national advertising and promotions.
In addition, under that Agreement the Company may increase the total
advertising and promotions contribution to 5% for franchisees operating
restaurants pursuant to that Agreement, if such increase is approved by an
affirmative vote representing 75% or more of all domestic Wendy's
restaurants.
In 1992, 1993, and 1994 a systemwide vote was taken on a proposal to
increase national advertising during the following calendar year. This
voluntary program reallocates the 4% required minimum advertising
expenditures such that 2 1/2% goes toward national advertising and 1 1/2%
toward local and regional advertising during 1993, 1994, and 1995. These
minimum requirements will revert back to 2% for national and 2% for local
and regional advertising unless a new systemwide vote in 1995 approves
reallocation for 1996.
During fiscal 1994, 1993, and 1992, approximately $101 million, $86
million, and $67 million, respectively, were spent on advertising,
promotions, and related expenses by WNAP. WNAP is a not-for-profit
corporation which was established to collect and administer the funds
contributed by the Company and all domestic franchisees. WNAP's Trustees
are comprised of representatives of both the Company and its franchisees.
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PERSONNEL
As of January 1, 1995, the Company employed approximately 44,000 people, of
whom approximately 43,000 were employed in company-operated restaurants.
The total number of full-time employees at that date was approximately
7,000. The Company believes that its employee relations are satisfactory.
The Company is not a party to any collective bargaining agreements except
for (i) an agreement with a labor union which represents certain employees
of the Bakery, and (ii) an agreement with a union which represents certain
employees at one of the Company's Canadian restaurants.
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ITEM 2. PROPERTIES
Wendy's restaurants are built to Company specifications as to exterior
style and interior decor. The majority are free-standing, one-story brick
buildings, substantially uniform in design and appearance, constructed on
sites of approximately 40,000 square feet, with parking for approximately
45 cars. Some restaurants, located in downtown areas or shopping malls, are
of a store-front type and vary according to available locations but
generally retain the standard sign and interior decor. The typical new
free-standing restaurant contains about 2,800 square feet and has a cooking
area, a dining room capacity for 90 persons, and a double pick-up window
for drive-thru service. The restaurants are generally located in urban or
heavily populated suburban areas, and their success depends upon serving a
large number of customers. Wendy's also operates restaurants in special
site locations such as Wal-Mart stores, travel centers, military bases,
arenas, malls, hospitals, airports, and college campuses.
At January 1, 1995, the Company and its franchisees operated 4,411 Wendy's
restaurants in the locations listed under Item 2 on page 6 of this Form
10-K. Of the 1,264 company-operated Wendy's restaurants, the Company owned
the land and building for 604 restaurants, owned the building and held
long-term land leases for 244 restaurants, and held leases covering land
and building for 416 restaurants. The Company's land and building leases
are generally written for terms of 20 to 25 years with one or more
five-year renewal options. In certain lease agreements the Company has the
option to purchase the real estate. Certain leases require the payment of
additional rent equal to a percentage (ranging from 1% to 10%) of annual
sales in excess of specified amounts. Some of the real estate owned by the
Company is subject to mortgages which mature over various terms. Surplus
land and buildings are generally held for sale.
The Company also owns land and buildings for 351 restaurant locations which
it in turn leases to certain of its franchisees.
The Company owns approximately 37.6 acres of land in Dublin, Ohio on which
are located the Company's corporate headquarters. This complex contains
approximately 200,000 square feet of office space.
5
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<TABLE>
<CAPTION>
Domestic Wendy's
State Company Franchise
<S> <C> <C>
Alabama - 80
Alaska - 8
Arizona 48 13
Arkansas - 38
California 16 174
Colorado 38 52
Connecticut - 33
Delaware 18 -
Florida 160 132
Georgia 53 140
Hawaii - 4
Idaho - 15
Illinois 90 105
Indiana 1 128
Iowa - 33
Kansas 11 41
Kentucky 9 79
Louisiana 33 19
Maine - 9
Maryland - 85
Massachusetts 28 23
Michigan 40 138
Minnesota 27 22
Mississippi 20 36
Missouri 15 61
Montana - 11
Nebraska - 29
Nevada - 33
New Hampshire - 16
New Jersey 2 62
New Mexico - 22
New York - 147
North Carolina 56 108
North Dakota - 6
Ohio 210 130
Oklahoma - 39
Oregon 20 30
Pennsylvania 62 125
Rhode Island - 7
South Carolina - 72
South Dakota - 9
Tennessee - 136
Texas 95 150
Utah - 28
Vermont - 6
Virginia 54 92
Washington 43 11
West Virginia 19 32
Wisconsin - 44
Wyoming - 11
District of Columbia - 6
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1,168 2,830
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<CAPTION>
International Wendy's
Country/Territory Company Franchise
<S> <C> <C>
Aruba - 2
Bahamas - 3
Canada 96 81
Cayman Islands - 1
China 1
Dominican Republic - 3
El Salvador - 4
Greece - 8
Guam - 2
Guatemala - 3
Honduras - 5
Hong Kong - 5
Hungary - 1
Iceland - 1
Indonesia - 11
Italy - 2
Japan - 41
Kuwait - 3
Mexico - 7
New Zealand - 5
Oman - 2
Philippines - 29
Poland - 1
Puerto Rico - 18
Saudi Arabia - 17
South Korea - 29
Switzerland - 3
Taiwan - 13
Thailand - 4
Turkey - 4
United Arab Emirates - 3
United Kingdom - 2
Virgin Islands - 3
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96 317
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</TABLE>
6
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ITEM 3. LEGAL PROCEEDINGS
On May 26, 1989, Jonathan Raven and Eli Shapiro, individually and
purportedly on behalf of a putative class of other persons similarly
situated, filed a complaint against the Company and others in the U.S.
District Court for the Northern District of Illinois, Eastern Division. The
complaint, insofar as it pertains to the Company, alleges violations of
Section 10(b) of the Securities Exchange Act of 1934, Rule 10b-5 of the
Securities and Exchange Commission promulgated thereunder, and the common
law. The plaintiffs claim to be investors in a limited partnership which
was a franchisee of the Company. The partnership was formed in 1985 to
purchase from the Company restaurants located in Washington and Oregon. The
purchase was funded in part by the offering of limited partnership
interests and revenue sensitive subordinated notes to the investors. The
offering was concluded in 1986. The complaint seeks compensatory damages in
the amount of $18 million, attorneys fees and rescission of the purchases
of limited partnership interests and revenue sensitive subordinated notes
sold in the offering. The Company obtained releases from 82% of the
potential plaintiffs. The remaining potential plaintiffs have not been
certified as a class. The case was transferred upon motion of the
defendants to the U.S. District Court in Atlanta, Georgia. The defendants'
motion to dismiss the federal claims was granted with prejudice on October
9, 1991. The defendants' motion to dismiss the state claim was granted
without prejudice on the same day. The plaintiffs filed a motion for
reinstatement of their Section 10(b), Rule 10b-5 and common law claims on
February 14, 1992. That motion was granted on September 24, 1992. The
defendants subsequently filed a motion to permit an interlocutory appeal
and renewed their motion to dismiss the Section 10(b) and Rule 10b-5 claims
for reasons the court had not yet considered. The defendants' motion to
file an interlocutory appeal was granted and the parties have filed briefs
with the 11th Circuit Court of Appeals on the question of whether the
District Court's decision to reinstate the plaintiffs' claims was proper.
The Company intends to defend the action vigorously and believes that it
has meritorious defenses to the claims sought to be asserted and that the
resolution of the action will not materially affect the Company's financial
condition. This case was last referenced in the Company's Form 10-K for the
year ended January 2, 1994.
On April 12, 1994, Richard Johnson and 12 other individuals, individually
and purportedly on behalf of a putative class of other persons similarly
situated, filed a complaint against the Company and others in the U.S.
District Court for the Northern District of Georgia. The complaint alleges
that the Company has engaged in racial discrimination in violation of Title
VII and 42 U.S.C. Section 1981. The plaintiffs further allege that the
Company conspired with certain of its franchisees to deprive the plaintiffs
and employees of such franchisees of their rights under 42 U.S.C. Section
1985. The plaintiffs seek judgment in an undetermined amount against the
Company for punitive and compensatory damages (including benefits) as well
as injunctive and equitable relief, including reinstatement of the
plaintiffs to their former positions. Discovery is underway in this case.
The Company intends to defend the action vigorously, and believes that it
has meritorious defenses to the claims sought to be asserted and that the
resolution of the action will not materially affect the Company's financial
condition. This case was last referenced in the Company's Form 10-Q for the
quarter ended April 3, 1994.
On April 29, 1994, Mercy Health Services filed a complaint against the
Company in the U.S. District Court for the Southern District of New York.
The plaintiff, a shareholder of the Company, alleges that the Company
wrongfully refused to include a shareholder resolution in the Company's
notice of proxy and proxy statement for the May 2, 1994 Annual Meeting of
Shareholders. The shareholder resolution requested the Board of Directors
to adopt a policy making all company restaurants smoke-free by 1995, and
requested that the policy include stipulations that, beginning in 1995, all
new franchisees' facilities be smoke-free and all renewals of franchise
agreements include smoke-free facilities in the agreements. The plaintiff
seeks a declaration that the Company's failure to include the shareholder
resolution in the proxy statement was unlawful, an injunction which would
enjoin the Company from excluding the plaintiff's shareholder resolution
from any future proxy statements when the resolution otherwise qualifies
for inclusion under the applicable rules of the Securities and Exchange
Commission, and an award for costs, expenses and attorneys fees. The
Company filed a motion for judgment on the pleadings and the plaintiff
filed a cross-motion for summary judgment. Both motions were denied by the
District Court on November 29, 1994. Discovery is underway in this case.
The Company intends to defend the action vigorously, and believes that it
has meritorious defenses to this action and that an unfavorable judgment
would not have a material impact upon the financial condition of the
Company. This case was last referenced in the Company's Form 10-Q for the
quarter ended April 3, 1994.
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
7
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EXECUTIVE OFFICERS OF THE REGISTRANT
<TABLE>
<CAPTION>
NAME AGE POSITION WITH COMPANY OFFICER SINCE
<S> <C> <C> <C>
R. David Thomas 62 Senior Chairman of the Board and Founder, Director 1969
James W. Near 56 Chairman of the Board, Director 1986
Gordon F. Teter 51 President, Chief Executive Officer and
Chief Operating Officer, Director 1987
John K. Casey 62 Vice Chairman and Chief Financial Officer, Director 1981
Ronald E. Musick 54 Executive Vice President, Director 1986
Charles W. Rath 58 Executive Vice President 1987
George Condos 41 Executive Vice President 1982
John T. Schuessler 44 Executive Vice President 1983
John W. Wright 47 President - International Division 1993
Raymond A. Serina 53 Senior Vice President 1990
Lawrence A. Laudick 47 Vice President, General Controller & 1976
Assistant Secretary
Lawrence E. Schauf 49 Senior Vice President, General Counsel & Secretary 1987
Stephen D. Farrar 44 Senior Vice President 1984
John F. Brownley 52 Senior Vice President and Treasurer 1981
Jack C. Whiting 45 Senior Vice President 1987
Robert G. Zoeller 50 Senior Vice President 1991
Brion G. Grube 43 Senior Vice President 1990
</TABLE>
No arrangements or understandings exist pursuant to which any person has
been, or is to be, selected as an officer, except in the event of a change
in control of the Company, as provided in the Company's Key Executive
Agreements. The executive officers of the Company are appointed by the
Board of Directors.
With the exception of Messrs. Near, Teter, Casey, Musick, Condos,
Schuessler, Wright, Serina, Schauf, Farrar, Whiting, Zoeller and Grube each
of the above individuals has held the same principal occupation with the
Company for at least the last five years.
Mr. Near was President and Chief Operating Officer of Sisters
International, Inc. from 1981 until 1986, when he assumed the position of
President and Chief Operating Officer of the Company. He assumed the duties
of Chief Executive Officer in 1989. Mr. Near became Chairman of the Board
in 1991.
Mr. Teter was President of Casa Lupita Restaurants and Executive Vice
President of its parent company, Ponderosa, Inc., from 1985 to 1987. Mr.
Teter became a Senior Vice President of the Company in 1987 and Executive
Vice President in 1988. He was named President and Chief Operating Officer
in 1991. Mr. Teter assumed the title of Chief Executive Officer in 1994.
Mr. Casey was Senior Vice President of the Company from 1984 to 1987, at
which time he became Executive Vice President. Mr. Casey became Executive
Vice President - Finance and Administration in 1987. He assumed his current
position in 1991.
Mr. Musick was Senior Vice President, Secretary and Treasurer of Sisters
International, Inc. from 1982 to 1987. Mr. Musick became a Senior Vice
President of the Company in 1986. He assumed his current position in 1991.
Mr. Condos joined the Company in 1977. In 1987, he was promoted from Vice
President of Company Operations to Senior Vice President of Company
Operations. In 1988, he was promoted to Senior Vice President of Wendy's
Southwest Region. In 1992, he was named Executive Vice President of
Development.
Mr. Schuessler joined the Company in 1974. He served in Company Operations
as Regional Vice President from 1983 to 1984, Zone Vice President from 1984
to 1986, and Division Vice President from 1986 until 1987, when he was
promoted to Senior Vice President to the Northeast Region. As of February
20, 1995, Mr. Schuessler was promoted to Executive Vice President to U.S.
Operations.
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Mr. Wright joined Wendy's in 1993 as President, International. He was with
Pizza Hut, Inc. as Division Vice President from 1989 to 1993 and also with
Pizza Hut, Inc. from 1981 to 1986 where he had successful international
experience with their operations in Europe. From 1986 to 1989 Mr. Wright
was National Vice President of Operations, East with Taco Bell.
Mr. Serina was Vice President of Operations of Krystal Co. from 1986 to
1988. From 1988 to 1990, he was President and Chief Executive Officer of
Self-Service Drive Thru, Inc. Mr. Serina joined the Company in 1990 as Vice
President and was promoted in 1990 to Senior Vice President.
Mr. Schauf joined the Company in 1987 as Vice President, General Counsel
and Secretary. In 1991, he became Senior Vice President, General Counsel
and Secretary. Prior to joining the Company, Mr. Schauf was affiliated with
Pizza Hut, Inc.
Mr. Farrar joined Wendy's in 1980 as Area Director. In 1982, he transferred
from Company Operations to Franchise Operations. He became Regional Vice
President in 1984. In 1988, he moved back to Company Operations as Division
Vice President where he held that position until being named Senior Vice
President to the Southwest Region in 1992.
Mr. Whiting joined the Company in 1975. In 1982, he became Regional
Director for the West Virginia Region and named Division Vice President in
1987. In 1992, he became Senior Vice President to the Midwest Region.
Mr. Zoeller joined the Company in 1991 as Division Vice President of the
Eastern Division. Prior to joining Wendy's, he was a Managing Partner for
Tony Roma's, A Place for Ribs from 1989 to 1991. As of February 23, 1995,
Mr. Zoeller was promoted to Senior Vice President to the Northeast Region.
Mr. Grube joined Wendy's in 1990 as Division Vice President and was
promoted to Senior Vice President - Canada in 1993. Before joining Wendy's,
he was with Imperial Savings Association from 1988 to 1990. Prior to that
time, Mr. Grube spent 12 years with Pizza Hut, Inc.
9
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PART II
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ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
Wendy's shares are traded on the New York, Boston, Cincinnati, Midwest,
Pacific, and Philadelphia Stock Exchanges (trading symbol: WEN). Options in
Wendy's shares are traded on the Pacific Stock Exchange.
Market Price of Common Stock
<TABLE>
<CAPTION>
1994 High Low Close
---------------------------------------------
<S> <C> <C> <C>
First Quarter $18 3/8 $16 1/4 $17 1/8
Second Quarter 18 1/2 15 1/2 15 3/4
Third Quarter 16 1/2 14 14 1/2
Fourth Quarter 15 3/4 13 1/4 14 3/8
<CAPTION>
1993 High Low Close
---------------------------------------------
<S> <C> <C> <C>
First Quarter $14 1/4 $12 3/8 $13 1/2
Second Quarter 15 1/8 12 7/8 14 1/2
Third Quarter 15 1/2 13 3/8 15 1/2
Fourth Quarter 17 3/8 15 1/8 17 3/8
</TABLE>
At March 6, 1995, the Company had approximately 57,000 shareholders of
record.
Dividends Declared Per Share
<TABLE>
<CAPTION>
Quarter 1994 1993
-----------------------------------
<S> <C> <C>
First $.06 $.06
Second .06 .06
Third .06 .06
Fourth .06 .06
</TABLE>
-------------------------------------------------------------------------------
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
1994 1993 1992* 1991 1990
OPERATIONS (IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Systemwide sales $4,227.2 3,924.1 3,612.9 3,223.6 3,070.3
Retail sales $1,256.2 1,198.8 1,123.9 962.8 922.2
Revenues $1,397.9 1,320.1 1,238.5 1,059.7 1,010.9
Company restaurant operating profit $ 194.0 173.7 154.6 125.2 115.5
Income before income taxes $ 149.5 115.5 101.1 77.7 60.7
Net income** $ 97.2 79.3 64.7 51.3 39.3
Capital expenditures $ 141.5 116.6 119.6 69.4 41.7
FINANCIAL POSITION (IN MILLIONS)
Total assets $1,086.1 996.5 919.5 880.3 757.9
Property and equipment, net $ 766.3 707.3 675.5 617.1 569.6
Long-term obligations $ 144.9 200.6 233.7 239.6 168.1
Shareholders' equity $ 681.5 600.8 528.7 477.9 446.8
PER SHARE DATA
Net income - fully diluted** $ .91 .76 .63 .52 .41
Dividends $ .24 .24 .24 .24 .24
Shareholders' equity $ 6.70 5.96 5.35 4.91 4.61
Market price at year-end $ 14.38 17.38 12.63 9.25 6.38
<FN>
* Fiscal year 1992 includes 53 weeks.
** 1990 reflects a $696,000, $.01 per share extraordinary gain on early
extinguishment of debt.
</TABLE>
10
<PAGE>
-------------------------------------------------------------------------------
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
1994 OVERVIEW
Fully diluted earnings per share increased 20% to a record $.91 for
the year ending January 1, 1995, from $.76 in 1993. The company also
reported record net income of $97.2 million for 1994, a 23% increase over
the $79.3 million recorded for 1993.
Systemwide restaurant sales, or sales from all company and franchised
restaurants, reached $4.2 billion in 1994, the company's highest level
ever. Company and franchised restaurants both attained record average net
sales per restaurant. Average net sales per domestic company-operated
restaurant increased to $1,001,000 in 1994, the first time the company
achieved million dollar average sales per restaurant.
Wendy's restaurant operating margin continued to show improvement,
reaching 15.4% for 1994 versus 14.5% for 1993 and 13.8% for 1992. The
margin has increased each year since 1989. This reflects the continuing
emphasis on control of restaurant operating costs, expanding average sales
per restaurant and, in 1994, favorable purchase prices of key food items.
New restaurants opened systemwide totaled 298 in 1994, an increase of
47 more restaurants than the number opened in 1993, and the most
restaurants opened in the last eight years. There were also 65 restaurants
under construction at year-end. The company typically experiences higher
average net sales in newly opened restaurants.
RETAIL SALES
Total company retail sales were $1.3 billion in 1994 compared with
$1.2 billion in 1993, a 4.8% increase. This increase reflected a 2.4%
increase in average domestic net restaurant sales and an additional 26
average domestic restaurants open.
The improvement in average domestic net sales was a result of solid
restaurant operations, effective marketing campaigns featuring both
existing and new products, and a value menu strategy combined with the
quality and variety of offerings. This improvement was tempered by the
intense competition in the quick-service restaurant industry, and to a
lesser extent adverse weather conditions at the start of the year. The
average number of transactions increased approximately 1.2% in 1994
compared with a 4.2% increase in 1993. Domestic selling prices for the
company remained unchanged for 1994 compared with a decrease of
approximately .4% in 1993. Selling prices for 1994 remain below 1990 levels
as the company continued to emphasize its value strategy.
The following chart reflects average net sales per domestic restaurant
for the last three years:
<TABLE>
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
Company $1,001,000 $978,000 $924,000
Franchise $ 982,000 $960,000 $907,000
Total domestic $ 988,000 $966,000 $912,000
</TABLE>
Average net sales per domestic company restaurant for 1994 increased
2.4% over 1993 and 8.3% over 1992. As 1992 was a 53-week fiscal year, these
amounts have been adjusted to a comparable 52-week year basis.
RESTAURANT OPERATING COSTS AND EXPENSES
Cost of sales declined to 58.3% of retail sales in 1994 from 58.9% in
1993. Domestic food costs as a percent of domestic retail sales decreased
to 29.3% in 1994 from 30.2% in 1993. This reflects favorable purchase
prices for key products such as beef, chicken, and produce.
Domestic restaurant labor costs as a percent of domestic retail sales
were 24.8% in 1994 compared with 24.5% in 1993. The higher percentage in
1994 reflects restaurant labor wage rate increases of approximately 4%
partially offset by the 2.4% increase in average domestic net sales. In
addition, selected markets increased restaurant management staffing levels
to provide better customer service. The company controls labor hours by
adherence to its labor guidelines.
Total company restaurant operating costs were $330.5 million in 1994
versus $319.4 million in 1993, or 26.3% and 26.6% of retail sales in 1994
and 1993, respectively. Improvement as a percent of retail sales was seen
in advertising, utilities, and insurance expenses.
ROYALTIES
Royalty income, before reserves, was $116.4 million for the year 1994
versus $106.3 million for 1993, a 9.4% increase. Reserves against royalties
for the current year amounted to $2.8 million compared with $1.7 million
for 1993.
Average net sales per domestic franchise restaurant increased to
$982,000 in 1994 from $960,000 in 1993, an increase of 2.3%. Royalties also
increased from domestic and international franchise restaurant openings.
Management reviews reserves on a regular basis and believes the
company has adequate levels for royalty and other franchise-related
receivables and contingencies. When the outlook changes for reserve levels
established in prior years, they are modified accordingly and the impact is
reflected in general and administrative expenses, as discussed below.
OTHER REVENUES
Pretax gains on restaurants sold to franchisees amounted to $11.6
million for 1994 compared with $8.1 million in 1993. The company sold 49
restaurants to franchisees during 1994 versus 86 restaurants in 1993.
Certain dispositions have resulted in land and buildings being retained by
the company and leased to franchisees. This source of rental income to the
company increased $1.4 million over 1993 for a total of $11.6 million in
rental income for 1994. In both years, franchisees exercised
11
<PAGE>
options to purchase real estate originally retained by the company and
leased to the franchisee. In 1994, 32 properties were sold pursuant to
options exercised by franchisees for a $2.4 million gain and in the prior
year 17 properties were sold for a $780,000 gain.
The company also has various write-offs and retirements of assets each
year which reduce other revenues. These result from the continuing program
of remodeling restaurants, monitoring restaurant performance for potential
relocations or closings, and disposing of unnecessary assets. Such
write-offs totaled $4.5 million in 1994 and $3.2 million in 1993, partly
offsetting gains from franchising restaurants. Also, a reserve of $2.8
million was provided in 1993 for 12 underperforming restaurants which were
closed in January 1994. This reflected amounts for lease buy outs, the
write down of assets to realizable value, and other related expenses.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses were $108.3 million or 7.7% of
revenues for the year 1994 compared with $102.2 million or 7.7% for 1993.
Salaries and related benefits, the largest component of general and
administrative expenses, increased $6.2 million, primarily reflecting
annual merit-based employee compensation increases and minimal
administrative staff additions to support new restaurant development.
Insurance expense declined $3.1 million in 1994 as the prior year included
an additional $4.0 million accrual to reflect trends in year-end 1993's
workers' compensation and general liability claims.
As a result of continuing improvement in the financial strength of the
franchise community, net reserve reversals reduced expenses by $2.1 million
in 1994 and $2.2 million in 1993.
INTEREST
Net interest expense decreased in 1994 primarily as a result of lower
interest expense of $18.7 million in 1994 compared with $21.6 million in
1993. This was due to the early retirement of $30 million of debt in late
1993. Interest income was lower at $8.8 million for 1994 versus $9.8
million for 1993 due to reduced earnings on short-term investments.
INCOME TAXES
The effective income tax rate for 1994 was 35% compared with 31.4% in
1993. In 1993, the company generated a Canadian tax benefit of $6.0
million. This was a result of regionalizing Canadian operations which
produced overall administrative and operational efficiencies and more
closely aligned the organization to domestic operations.
COMPARISON OF 1993 TO 1992
Net income for the year ended January 2, 1994, was $79.3 million, a
23% increase over the $64.7 million reported for 1992. Fully diluted
earnings per share was $.76 in 1993 compared with $.63 for 1992.
Total company retail sales increased 6.7% in 1993 to $1.2 billion
compared with $1.1 billion in 1992. This increase reflected a 5.8% increase
in average domestic net restaurant sales and an additional 32 average
domestic restaurants open. Total retail sales for 1993 reflected one week's
fewer sales as 1992 was a 53-week fiscal year.
The improvement in average domestic net sales was a result of the
company's emphasis on restaurant operations, highly effective marketing
campaigns of both existing and new products, and the value menu strategy,
such as Super Value Menu, Combo Meals, and Kids' Meals. The average number
of transactions increased approximately 4.2% in 1993. Domestic selling
prices for the company were down approximately .4% in 1993 following a 1.9%
decrease in 1992.
Total company cost of sales as a percent of retail sales decreased
slightly to 58.9% in 1993 from 59.0% in 1992. Domestic food costs as a
percent of domestic retail sales increased to 30.2% in 1993 from 29.7% in
1992. This reflected increases primarily in beef, chicken, and lettuce
prices coinciding with reductions in selling prices.
Domestic labor costs as a percent of domestic retail sales were 24.5%
in 1993 compared with 24.9% in 1992. This improvement reflected efforts to
adhere to the company's labor guidelines along with the impact from higher
average domestic net restaurant sales offset by restaurant labor wage rate
increases of approximately 2% in 1993.
Total company restaurant operating costs were $319.4 million or 26.6%
of retail sales for 1993. This compared with costs in 1992 of $306.4
million or 27.2% of retail sales. A significant portion of this percentage
improvement resulted from the relatively fixed nature of some of the cost
components, while average sales levels increased. In addition, group
insurance and coupon expenses declined as a percent of sales.
Royalty income, before reserves, was $106.3 million for the year ended
January 2, 1994, and $97.6 million for the year ended January 3, 1993, or a
9.0% increase. Royalty reserves amounted to $1.7 million in 1993 compared
with $1.2 million in 1992. Average net sales per domestic franchise
restaurant increased to $960,000 in 1993 from $907,000 in 1992, an increase
of 5.9% on a comparable 52-week year basis. The remainder of the increase
reflected royalties from additional domestic and international franchise
restaurants.
Pretax gains on restaurant dispositions for 1993 amounted to $8.1
million compared with $7.7 million in 1992. There were 86 company
restaurants sold to franchisees in 1993 versus 44 restaurants in 1992.
Certain dispositions resulted in land and buildings being retained by the
company and leased to franchisees. This provided a source of rental income
to the company which increased $1.8 million over 1992 to $10.1 million.
A reserve of $2.8 million was provided in the fourth quarter of 1993
to reflect lease buy outs, the write down of assets to realizable value,
and other related expenses to close certain underperforming restaurants.
Also, $30 million of debt was retired early resulting in $672,000 of
redemption expenses.
12
<PAGE>
General and administrative expenses were approximately the same
percent of revenues in both 1993 and 1992. In recognition of continuing
improvement in the financial strength of the franchise community, net
reserve reversals were $2.2 million in 1993 and 1992 reversals were $1.7
million. Insurance accruals were increased $4.0 million in 1993 to reflect
trends in workers' compensation and general liability claims. Salaries and
related benefits rose $7.9 million over 1992, primarily reflecting annual
employee merit increases and minimal administrative staff additions to
support new restaurant development.
Net interest expense decreased in 1993 primarily reflecting lower
interest expense. Interest income was $9.8 million in 1993 versus $10.1
million in 1992. Interest expense was $21.6 million in 1993 compared with
$22.5 million in 1992. This primarily reflected a 52-week fiscal year in
1993 versus a 53-week fiscal year in 1992, and a reduction of expense on
capitalized leases.
The effective income tax rate for 1993 decreased to 31.4% from 36% in
1992. In 1993, the company regionalized its Canadian operations. This was
intended to produce overall administrative and operational efficiencies and
closely align the organization to domestic operations. In connection with
this restructuring the company was able to generate Canadian tax benefits
of $6.0 million.
FINANCIAL POSITION
OVERVIEW
Total assets increased $89.6 million or 9.0% over 1993 primarily due
to additions to property and equipment for restaurant development. Cost in
excess of net assets acquired, net increased $6.5 million as a result of
the acquisition of a franchise. Total cash and short-term investments
amounted to $134.9 million at year-end 1994 compared with $112.3 million at
year-end 1993. Return on average assets was 16.3% in 1994 compared with
14.3% in 1993, the fifth consecutive year this ratio increased.
Long-term debt was reduced in 1994 as $50 million was reclassed to
current portion debt for the 12 1/8% Notes which are due in April of 1995.
This caused the long-term debt to equity ratio to drop to 21% for year-end
1994, compared with 33% at year-end 1993, and 44% at year-end 1992.
Shareholders' equity per share reached $6.70 at January 1, 1995, an
increase of 12.4%. At year-end 1994, shareholders' equity was equal to 63%
of total assets. The company's return on average equity was 15.2% in 1994
compared with 14.2% in 1993. This is the eighth consecutive year return on
average equity has increased.
The following chart shows year-end reserve balances related to royalty
receivables and other franchise-related receivables and contingencies by
balance sheet category:
<TABLE>
<CAPTION>
JANUARY 1, JANUARY 2,
(IN MILLIONS) 1995 1994
<S> <C> <C>
Accounts receivable, net $4.0 $5.2
Notes receivable, net .8 .4
Other assets 2.3 1.9
Accrued expenses, other .6 .8
---- ----
$7.7 $8.3
---- ----
</TABLE>
CASH FLOW
Cash provided by operating activities was $165.7 million in 1994,
$146.7 million in 1993, and $120.5 million in 1992. Cash from operations
exceeded capital expenditures by $24.2 million in 1994 and $30.1 million in
1993. Additionally in 1994, cash provided by operations exceeded the total
of long-term obligations.
Over the last three years, cash provided by operating activities was
primarily used for capital expenditures, dividend payments, debt
repayments, and acquisitions of franchised restaurants. During this time,
the company acquired 88 restaurants and retired early over $31 million of
higher rate debt and $33 million in convertible subordinated debentures. In
April of 1995, the company will retire $50 million of 12 1/8% Notes.
Cash proceeds of $21.1 million were realized in 1994 from the sale of
company restaurants to franchisees, while $17.2 million was provided in
1993 and $12.9 million in 1992.
The company invests excess cash in various short-term investments.
Instruments with maturities exceeding three months are classified as
short-term investments on the balance sheet. The company liquidated these
investments in January 1995 in anticipation of the $50 million debt
retirement and other potential cash requirements needed in early 1995. The
company also invests a portion of excess cash in more liquid investments,
included as cash equivalents on the balance sheet. These include state and
municipal securities, Euro Time Deposits, and other securities, a portion
of which are tax-exempt.
During 1994, capital expenditures amounted to $142 million. New
restaurant expenditures amounted to $74 million; $38 million was spent for
improvements to existing restaurants; and $30 million was spent for other
additions. Current plans are to open or have under construction about 400
new Wendy's restaurants in 1995, of which approximately 120 will be
company-operated. Capital expenditures could total as much as $170 million
in 1995. Cash provided by operating activities, cash and investments on
hand, existing revolving credit agreements, and possible asset dispositions
should enable the company to meet its financial requirements through 1995.
If additional cash is needed for capital expenditures, future acquisitions
of restaurants from franchisees, or for other corporate purposes, the
company believes it would be able to obtain additional cash through
existing revolving credit agreements, new revolving credit agreements which
the company believes it could execute, or through the issuance of debt
securities. In December 1994, the company filed a registration statement
with the United States Securities and Exchange Commission for $200 million
of debt securities which could be issued for the next two years if needed.
13
<PAGE>
INFLATION
Financial statements determined on a historical cost basis may not
accurately reflect all the effects of changing prices on an enterprise.
Several factors tend to reduce the impact of inflation for the company.
Inventories approximate current market prices, there is some ability to
adjust prices, and liabilities are repaid with dollars of reduced
purchasing power.
INTERNATIONAL
During 1994, the company focused on assessing and strengthening
current international operations. Also, a strategic plan was developed to
achieve future growth. For 1995 and beyond, the company will implement
these strategies for profitable and rapid expansion. Wendy's intends to
open or have under construction at least 100 international restaurants in
1995, and anticipates higher levels in succeeding years. Although
international growth will come primarily through franchising, the company
may enter into joint venture agreements and possibly open company-operated
restaurants outside of Canada. On January 1, 1995, there were 413 Wendy's
restaurants operating outside the United States and in 33 countries and
territories. Of these, 177 were in Canada, with 96 being operated by the
company.
Canada is our largest international market, and like domestic markets,
the restaurant industry is extremely competitive. The environment includes
a difficult economy, adverse tax laws, and minimum wage increases.
Nevertheless, 1994 was a very productive year as average net sales of
company-operated restaurants increased 5.9% in local currency, following a
7.8% increase a year ago. Restaurant level profitability likewise improved
once again. The regionalization of Canadian operations initiated at the end
of 1993 was beneficial to the company both operationally and
administratively in 1994. Combination units of Wendy's and Tim Hortons, a
Canadian chain of bakery and coffee shops, has proved very successful and
several more units are planned to be added in 1995.
MANAGEMENT'S OUTLOOK
The quick-service restaurant industry remains extremely competitive.
The company will continue to adhere to the strategies developed in the past
few years. The strategies of restaurant expansion and improvement of retail
sales and restaurant profitability are key components to improved future
performance. Statistics indicate that Wendy's is an underpenetrated concept
relative to total market potential. Therefore, responsible system growth
will accelerate in 1995, focusing on the markets with the best potential
for sales and return on investment. Each proposed site must undergo an
extensive operational and financial review before being approved. The
company plans on opening or having under construction 120 new
company-operated restaurants and 280 new franchised restaurants in 1995.
The company's expansion will be accomplished by use of cash and investments
on hand, cash provided by 1995 operations, existing revolving credit
agreements, new revolving credit agreements which the company believes it
could execute, possible asset dispositions, and possible borrowings.
Retail sales increases along with improved restaurant profitability in
existing restaurants are essential components to future growth. The company
will continue to focus on restaurant cost control by use of company
guidelines for food, labor, and other expenses. Continued emphasis on
operational execution, new promotional and permanent menu items, local and
national marketing to increase customer awareness, and restaurant remodels
are all strategies aimed at growing system sales. Selling prices did not
change in 1994, and any potential change in 1995 should be very modest.
In cooperation with vendors, Wendy's closely monitors purchase prices
while maintaining exacting quality standards for all products in each
restaurant. To protect the customer, the company is committed to a program
of ongoing food safety which includes quality suppliers, state-of-the-art
testing, proper equipment, rigid adherence to operational procedures, and
emphasis on sanitation and personal hygiene.
Cost control of administrative overhead is monitored through the use
of budgets for each corporate and field department. Actual expenses are
monitored by comparison to the budget and to historical results. All
additions to staffing must be justified based on the contribution to the
company or franchise operations support, or to restaurant development.
Wendy's will continue its strategy of acquiring restaurants from and
selling restaurants to franchisees where prudent. Acquired restaurants,
which may be underperforming, can be improved and then operated profitably
by the company or sold to a qualified franchisee. Other restaurants may be
acquired due to geographic or operational benefits to existing
company-operated markets. Selling restaurants generates cash which is used
for new development, acquisitions, and remodeling programs. During the last
three years, the company purchased 88 franchised restaurants and sold 179
company-operated restaurants to franchisees. Underperforming restaurants,
whether company or franchise operated, are monitored carefully and
revitalized where economically possible or closed if necessary for the
financial health of the system.
The strength and vitality of the franchise community is an essential
part of the continued success of the Wendy's system. Various strategies
have been developed to assist individual franchisees and the overall
franchise system. The aim of these strategies is to encourage responsible
new restaurant development, increase franchisees' financial health,
increase royalty income, and improve royalty receivable collection rates.
The company will continue to maintain appropriate reserves against
franchise receivables.
Competition is extremely intense in the quick-service restaurant
segment, particularly in the areas of marketing and pricing. In addition,
numerous external factors can have a significant impact on the company's
performance. Such factors could include product costs, the economy,
consumer perception of food safety, the weather, changing consumer tastes,
the labor supply, legal claims, the company's ability to obtain and
finance real estate, and government initiatives such as minimum wage rates,
taxes, and possible franchise legislation.
14
<PAGE>
-------------------------------------------------------------------------------
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
WENDY'S INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
Fifty-two weeks ended January 1, 1995, and January 2, 1994, and
fifty-three weeks ended January 3, 1993
<TABLE>
<CAPTION>
(IN THOUSANDS, EXCEPT PER SHARE DATA) 1994 1993 1992
<S> <C> <C> <C>
Revenues
Retail sales $1,256,192 $1,198,777 $1,123,868
Royalties 113,558 104,663 96,403
Other 28,107 16,655 18,235
---------- ---------- ----------
1,397,857 1,320,095 1,238,506
---------- ---------- ----------
Costs and expenses
Cost of sales 731,691 705,671 662,892
Company restaurant operating costs 330,480 319,367 306,356
General and administrative expenses 108,254 102,161 94,068
Depreciation and amortization of
property and equipment 68,070 65,655 61,686
Interest, net 9,891 11,706 12,414
---------- ---------- ----------
1,248,386 1,204,560 1,137,416
---------- ---------- ----------
INCOME BEFORE INCOME TAXES 149,471 115,535 101,090
INCOME TAXES 52,315 36,268 36,392
---------- ---------- ----------
NET INCOME $ 97,156 $ 79,267 $ 64,698
---------- ---------- ----------
---------- ---------- ----------
PRIMARY EARNINGS PER SHARE $.93 $.77 $.64
---- ---- ----
---- ---- ----
FULLY DILUTED EARNINGS PER SHARE $.91 $.76 $.63
---- ---- ----
---- ---- ----
DIVIDENDS PER SHARE $.24 $.24 $.24
---- ---- ----
---- ---- ----
PRIMARY SHARES 104,238 102,897 101,414
---------- ---------- ----------
FULLY DILUTED SHARES 112,368 111,245 109,650
---------- ---------- ----------
</TABLE>
THE ACCOMPANYING NOTES BEGINNING ON PAGE 19 ARE AN INTEGRAL PART OF THE
CONSOLIDATED FINANCIAL STATEMENTS.
15
<PAGE>
WENDY'S INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
January 1, 1995, and January 2, 1994
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS) 1994 1993
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 119,639 $ 71,698
Short-term investments, at market 15,292 40,647
Accounts receivable, net 28,015 27,381
Notes receivable, net 7,446 5,259
Deferred income taxes 13,067 12,244
Inventories and other 19,702 21,478
---------- ----------
203,161 178,707
---------- ----------
PROPERTY AND EQUIPMENT, AT COST
Land 222,671 203,651
Buildings 359,503 329,023
Leasehold improvements 189,243 182,519
Restaurant equipment 335,474 289,242
Other equipment 53,265 65,197
Capital leases 63,531 64,148
---------- ----------
1,223,687 1,133,780
Accumulated depreciation and amortization (457,368) (426,496)
---------- ----------
766,319 707,284
---------- ----------
COST IN EXCESS OF NET ASSETS ACQUIRED, NET 30,780 24,314
DEFERRED INCOME TAXES 16,142 15,250
OTHER ASSETS 69,690 70,931
---------- ----------
$1,086,092 $ 996,486
---------- ----------
---------- ----------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts and drafts payable $ 69,845 $ 68,735
Accrued expenses
Salaries and wages 22,173 16,288
Taxes 15,248 14,935
Insurance 26,037 21,345
Other 11,409 11,160
Income taxes 1,683 2,896
Deferred income taxes 3,108 2,299
Current portion of long-term obligations 57,674 5,611
---------- ----------
207,177 143,269
---------- ----------
LONG-TERM OBLIGATIONS
Term debt 104,842 156,741
Capital leases 40,018 43,892
---------- ----------
144,860 200,633
---------- ----------
DEFERRED INCOME TAXES 39,799 40,859
OTHER LONG-TERM LIABILITIES 12,758 10,930
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Preferred stock, authorized: 250,000 shares
Common stock, $.10 stated value, authorized:
200,000,000 shares Issued: 101,787,000 and
100,823,000 shares, respectively 10,179 10,082
Capital in excess of stated value 171,004 161,238
Retained earnings 503,712 430,866
Translation adjustments (19) 1,347
Pension liability adjustment (3,212) (2,572)
---------- ----------
681,664 600,961
Treasury stock at cost: 29,000 shares (166) (166)
---------- ----------
681,498 600,795
---------- ----------
$1,086,092 $ 996,486
---------- ----------
---------- ----------
</TABLE>
THE ACCOMPANYING NOTES BEGINNING ON PAGE 19 ARE AN INTEGRAL PART OF THE
CONSOLIDATED FINANCIAL STATEMENTS.
16
<PAGE>
WENDY'S INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
Fifty-two weeks ended January 1, 1995, and January 2, 1994, and fifty-three
weeks ended January 3, 1993
<TABLE>
<CAPTION>
(IN THOUSANDS) 1994 1993 1992
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 97,156 $ 79,267 $ 64,698
Adjustments to reconcile net income to
net cash provided by operating activities
Depreciation and amortization 73,726 68,978 63,374
Deferred income taxes (1,910) (6,370) (28)
Net gain from restaurant dispositions (11,588) (8,140) (7,681)
Net loss on other asset dispositions 2,123 6,466 4,424
Net reserves for receivables and other
contingencies 667 (747) (545)
Loss on early extinguishment of debt 672 23
Changes in operating assets and
liabilities net of effects of
acquisitions and dispositions
of restaurants
Accounts and notes receivable (7,266) (386) (9,104)
Inventories and other 1,648 (4,478) (1,801)
Accounts and drafts payable and accrued
expenses 6,434 8,580 (1,458)
(Increase) decrease in other assets (67) (305) 2,463
Income taxes (1,214) (4,356) 1,700
Other changes, net 6,002 7,495 4,412
---------- --------- ---------
Net cash provided by operating activities 165,711 146,676 120,477
---------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from restaurant dispositions 21,065 17,155 12,943
Proceeds from other asset dispositions 14,302 9,710 2,018
Capital expenditures (141,507) (116,573) (119,567)
Acquisition of franchises (12,761) (8,685) (7,602)
Proceeds from (investment in) marketable
securities 25,355 (6,387) (19,002)
Other investing activities (1,414) (2,107) (3,242)
---------- --------- ---------
Net cash used in investing activities (94,960) (106,887) (134,452)
---------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common stock 7,360 12,890 9,381
Principal payments on long-term obligations (5,581) (34,463) (13,738)
Dividends paid (24,310) (23,826) (23,523)
---------- --------- ---------
Net cash used in financing activities (22,531) (45,399) (27,880)
---------- --------- ---------
EFFECT OF EXCHANGE RATE CHANGES ON CASH (279) (104) (210)
---------- --------- ---------
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 47,941 (5,714) (42,065)
---------- --------- ---------
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD 71,698 77,412 119,477
---------- --------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $119,639 $ 71,698 $ 77,412
---------- --------- ---------
SUPPLEMENTAL DISCLOSURES OF CASH
FLOW INFORMATION
Interest paid $ 19,236 $ 21,874 $ 22,478
Interest received 8,335 8,832 10,106
Income taxes paid 52,937 41,517 32,092
Debt converted to common stock 1,510
Capital lease obligations incurred 1,541
Acquisition of franchises
Fair value of assets acquired, net $ 15,859 $ 13,170 $ 7,818
Cash paid 12,761 8,685 7,602
---------- --------- ---------
Liabilities assumed $ 3,098 $ 4,485 $ 216
---------- --------- ---------
</TABLE>
THE ACCOMPANYING NOTES BEGINNING ON PAGE 19 ARE AN INTEGRAL PART OF THE
CONSOLIDATED FINANCIAL STATEMENTS.
17
<PAGE>
WENDY'S INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
Fifty-two weeks ended January 1, 1995, and January 2, 1994, and fifty-three
weeks ended January 3, 1993
<TABLE>
<CAPTION>
(IN THOUSANDS) 1994 1993 1992
<S> <C> <C> <C>
COMMON STOCK AT STATED VALUE
Balance at beginning of period $ 10,082 $ 9,885 $ 9,741
Exercise of options 97 188 144
Conversion of subordinated debentures 9
---------- --------- ---------
Balance at end of period 10,179 10,082 9,885
---------- --------- ---------
CAPITAL IN EXCESS OF STATED VALUE
Balance at beginning of period 161,238 141,558 130,473
Exercise of options, including tax benefits 9,766 18,179 11,085
Conversion of subordinated debentures 1,501
---------- --------- ---------
Balance at end of period 171,004 161,238 141,558
---------- --------- ---------
RETAINED EARNINGS
Balance at beginning of period 430,866 375,425 334,250
Net income 97,156 79,267 64,698
Dividends paid (24,310) (23,826) (23,523)
---------- --------- ---------
Balance at end of period 503,712 430,866 375,425
---------- --------- ---------
TRANSLATION ADJUSTMENTS (19) 1,347 2,072
---------- --------- ---------
PENSION LIABILITY ADJUSTMENT (3,212) (2,572) (119)
---------- --------- ---------
TREASURY STOCK AT COST (166) (166) (166)
---------- --------- ---------
SHAREHOLDERS' EQUITY $681,498 $600,795 $528,655
---------- --------- ---------
COMMON SHARES
Balance issued at beginning of period 100,823 98,855 97,410
Exercise of options 964 1,882 1,445
Conversion of subordinated debentures 86
---------- --------- ---------
Balance issued at end of period 101,787 100,823 98,855
---------- --------- ---------
TREASURY SHARES (29) (29) (29)
---------- --------- ---------
COMMON SHARES ISSUED AND OUTSTANDING 101,758 100,794 98,826
---------- --------- ---------
</TABLE>
THE ACCOMPANYING NOTES BEGINNING ON PAGE 19 ARE AN INTEGRAL PART OF THE
CONSOLIDATED FINANCIAL STATEMENTS.
18
<PAGE>
WENDY'S INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS
The company's principal business is the operation of quick-service
restaurants serving high-quality food. At year-end 1994 the company and its
franchise owners operated 4,411 of these restaurants under the name
"Wendy's" in 50 states and in 33 other countries and territories.
FISCAL YEAR
The company's fiscal year ends on the Sunday nearest to December 31.
The 1994 and 1993 fiscal years consisted of 52 weeks and the 1992 fiscal
year consisted of 53 weeks.
BASIS OF PRESENTATION
The Consolidated Financial Statements include the accounts of the
company and its subsidiaries. All significant intercompany accounts and
transactions have been eliminated in consolidation.
For purposes of the Consolidated Statement of Cash Flows, the company
considers short-term investments with original maturities of three months
or less as cash equivalents. A substantial portion of these investments are
tax-exempt instruments.
INVENTORIES
Inventories are stated at the lower of cost (first-in, first-out) or
market, and consist primarily of restaurant food items and paper supplies.
PROPERTY AND EQUIPMENT
Depreciation and amortization are recognized on the straight-line
method in amounts adequate to amortize costs over the following estimated
useful lives: buildings, up to 25 years; leasehold improvements, up to 25
years; restaurant equipment, up to 15 years; other equipment, up to ten
years; and property under capital leases, the primary lease term. Interest
cost associated with the construction of new restaurants is capitalized,
while certain other costs, such as ground rentals and real estate taxes,
are expensed as incurred.
COST IN EXCESS OF NET ASSETS ACQUIRED
The cost in excess of net assets acquired is amortized on the
straight-line method over periods ranging from ten to 40 years which, for
leased restaurants, include the original lease period plus renewal options,
if applicable. The company periodically reviews goodwill and, based upon
undiscounted cash flows, impairments will be recognized when a permanent
decline in value has occurred. Accumulated amortization of cost in excess
of net assets acquired was $14.8 million and $13.2 million at January 1,
1995, and January 2, 1994, respectively.
PRE-OPENING COSTS
The company capitalizes certain operating costs which are incurred
prior to the opening of a new restaurant. These costs are amortized over a
one-year period.
CAPITALIZED SOFTWARE DEVELOPMENT COSTS
The company capitalizes internally developed software costs which are
amortized over a seven-year period.
FRANCHISE OPERATIONS
The company grants franchises to independent operators who in turn pay
technical assistance fees, royalties, and in some cases, rents for each
restaurant opened. A technical assistance fee is recorded as income when
each restaurant commences operations. Royalties, four percent of monthly
net sales, are recognized as income on the accrual basis. The company has
established reserves related to the collection of franchise royalties and
other franchise-related receivables and commitments (see Note 8). Included
in other assets is the long-term portion of notes receivable amounting to
$31.0 million and $29.7 million at January 1, 1995, and January 2, 1994,
respectively. The carrying amount of notes receivable currently
approximates fair value.
Franchise owners receive assistance in such areas as real estate site
selection, construction consulting, purchasing, and marketing from company
personnel who also furnish these services to company-operated restaurants.
Franchise expenses are included in general and administrative expenses.
FOREIGN OPERATIONS
At January 1, 1995, the company and its franchise owners operated 177
restaurants in Canada. Additionally, 236 restaurants were operated by
franchise owners in other foreign countries and territories.
NET INCOME PER SHARE
Primary earnings per share is computed by dividing net income by the
weighted average number of common shares outstanding and dilutive common
share equivalents during each period. Fully diluted computations assume
full conversion of the subordinated debentures into common shares, when
dilutive, and the elimination of related expenses, net of income taxes.
19
<PAGE>
2. TERM DEBT
Term debt at each year-end consisted of the following:
<TABLE>
<CAPTION>
(IN THOUSANDS) 1994 1993
<S> <C> <C>
Notes, unsecured, and Mortgages Payable with a
weighted average interest rate of 8.6%, due in
installments through 2004 $ 5,465 $ 5,639
Industrial Development
Revenue Bonds, with a
weighted average interest
rate of 8.7%, due in
installments through 2002 1,624 1,980
12 1/8% Notes, due April 1, 1995 49,995 49,977
7% Convertible
Subordinated Debentures,
due April 1, 2006 100,000 100,000
--------- --------
157,084 157,596
Current portion (52,242) (855)
--------- --------
$104,842 $156,741
--------- --------
--------- --------
</TABLE>
The industrial development revenue bonds were issued to provide funds
for the acquisition, construction, and improvement of various restaurants.
The 12 1/8% notes may not be redeemed prior to maturity.
The 7% convertible debentures are subordinated as to principal,
premium, if any, and interest to all senior indebtedness as defined in the
indenture. The conversion price is $12.30 per common share, subject to
adjustment in certain events. The debentures are redeemable, with limited
exceptions, at the option of the company on or after April 5, 1996.
The company purchased $28.6 million and $8.3 million of debt in 1993
and 1992, respectively. These purchases resulted in losses of $672,000 and
$23,000 in 1993 and 1992, respectively.
Based on quoted market prices for the convertible subordinated
debentures and future cash flows for all other term debt, the fair value of
total term debt was approximately $185 million at January 1, 1995, and $214
million at January 2, 1994.
The combined aggregate amounts of future maturities for all term debt
are as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
1995 $ 52,242
1996 541
1997 422
1998 282
1999 228
Later years 103,369
--------
$157,084
--------
</TABLE>
Subsequent to year-end, the company expanded its contractual lines of
credit and currently has approximately $100 million from various financial
institutions, generally at their respective prime rates.
Net interest expense for each year consisted of the following:
<TABLE>
<CAPTION>
(IN THOUSANDS) 1994 1993 1992
<S> <C> <C> <C>
Total interest charges $18,720 $21,554 $ 22,511
Interest income (8,829) (9,848) (10,097)
------- ------- --------
$ 9,891 $11,706 $ 12,414
------- ------- --------
</TABLE>
3. LEASES
The company occupies land and buildings and uses equipment under terms
of numerous lease agreements expiring on various dates through 2027. Terms
of land only and land and building leases are generally for 20 to 25 years.
Many of these leases provide for future rent escalations and renewal
options. Certain leases require contingent rent, determined as a percentage
of sales, when annual sales exceed specified levels. Most leases also
obligate the company to pay the costs of maintenance, insurance, and
property taxes.
At each year-end capital leases consisted of the following:
<TABLE>
<CAPTION>
(IN THOUSANDS) 1994 1993
<S> <C> <C>
Buildings $ 63,531 $ 64,148
Accumulated amortization (31,764) (29,972)
-------- --------
$ 31,767 $ 34,176
-------- --------
</TABLE>
20
<PAGE>
At January 1, 1995, future minimum lease payments for all leases, and
the present value of the net minimum lease payments for capital leases,
were as follows:
<TABLE>
<CAPTION>
Capital Operating
(IN THOUSANDS) Leases Leases
<S> <C> <C>
1995 $ 9,965 $ 24,670
1996 9,858 23,744
1997 9,442 22,510
1998 8,553 21,333
1999 6,809 18,437
Later years 25,280 88,801
-------- --------
Total minimum lease payments 69,907 $199,495
--------
Amount representing interest (24,457)
--------
Present value of net minimum lease
payments 45,450
Current portion (5,432)
--------
$ 40,018
--------
</TABLE>
Total minimum lease payments have not been reduced by minimum sublease
rentals of $1.1 million under capital leases, and $23.9 million under
operating leases due in the future under noncancelable subleases.
Rent expense for each year is included in company restaurant operating
costs and amounted to:
<TABLE>
<CAPTION>
(IN THOUSANDS) 1994 1993 1992
<S> <C> <C> <C>
Minimum rents $28,510 $28,425 $28,346
Contingent rents 7,035 7,238 6,544
Sublease rents (3,224) (3,256) (3,283)
------- ------- --------
$32,321 $32,407 $31,607
------- ------- --------
</TABLE>
In connection with the franchising of certain restaurants, the company
has leased land, buildings, and equipment to the related franchise owners.
Most leases provide for monthly rentals based on a percentage of
sales, while others provide for fixed payments with contingent rent when
sales exceed certain levels. Lease terms are approximately ten to 20 years
with one or more five-year renewal options. The franchise owners bear the
cost of maintenance, insurance, and property taxes.
The company generally accounts for the building and equipment portions
of the fixed payment leases as direct financing leases. The land portion of
leases and leases with rents based on a percentage of sales are accounted
for as operating leases.
At each year-end the net investment in financing leases receivable,
included in other assets, consisted of the following:
<TABLE>
<CAPTION>
(IN THOUSANDS) 1994 1993
<S> <C> <C>
Total minimum lease receipts $ 36,315 $ 45,548
Estimated residual value 4,542 4,662
Amount representing
unearned interest (19,659) (25,806)
Current portion, included
in accounts receivable (927) (911)
-------- --------
$ 20,271 $ 23,493
-------- --------
</TABLE>
At each year-end assets leased under operating leases consisted of the
following:
<TABLE>
<CAPTION>
(In thousands) 1994 1993
<S> <C> <C>
Land $ 54,230 $ 52,063
Building 83,130 81,060
Equipment 15,911 16,288
-------- --------
153,271 149,411
Accumulated amortization (43,685) (41,090)
-------- --------
$109,586 $108,321
-------- --------
</TABLE>
At January 1, 1995, future minimum lease receipts were as follows:
<TABLE>
<CAPTION>
Financing Operating
(IN THOUSANDS) Leases Leases
<S> <C> <C>
1995 $ 3,008 $ 2,934
1996 2,984 2,948
1997 3,003 2,656
1998 2,990 2,602
1999 2,866 2,398
Later years 21,464 13,697
-------- --------
$36,315 $27,235
-------- --------
</TABLE>
Net rental income for each year is included in other revenues and
amounted to:
<TABLE>
<CAPTION>
(IN THOUSANDS) 1994 1993 1992
<S> <C> <C> <C>
Minimum rents $ 1,868 $ 1,860 $1,182
Contingent rents 9,685 8,255 7,180
------- ------- -------
$11,553 $10,115 $8,362
------- ------- -------
</TABLE>
21
<PAGE>
4. INCOME TAXES
The provision for income taxes for each year consisted of the
following:
<TABLE>
<CAPTION>
(IN THOUSANDS) 1994 1993 1992
<S> <C> <C> <C>
Current
Federal $49,802 $39,512 $32,239
State and local 4,403 3,126 4,181
Foreign 20
------- ------- -------
54,225 42,638 36,420
------- ------- -------
Deferred
Federal (1,418) (243) (24)
State and local (213) (127) (4)
Foreign (279) (6,000)
------- ------- -------
(1,910) (6,370) (28)
------- ------- -------
$52,315 $36,268 $36,392
------- ------- -------
</TABLE>
In the first quarter of 1993, the company adopted Financial Accounting
Standard Number 109 (SFAS 109) - "Accounting for Income Taxes". Under SFAS
No. 109, like Financial Accounting Standard Number 96 (SFAS 96) -
"Accounting for Income Taxes" which the company adopted in 1989, deferred
income taxes are recognized by employing the liability method. The company
elected not to restate prior years' financial statements under the
provisions of SFAS No. 109 and has determined that the cumulative effect of
the implementation was not significant.
The temporary differences which give rise to deferred tax assets and
liabilities at each year-end consisted of the following:
<TABLE>
<CAPTION>
(IN THOUSANDS) 1994 1993
<S> <C> <C>
Deferred tax assets
Lease transactions $ 4,285 $ 4,410
Reserves not currently deductible 12,468 12,116
Foreign operations 12,946 14,040
All other 6,654 4,951
------- -------
36,353 35,517
Valuation allowance (7,144) (8,023)
------- -------
$29,209 $27,494
------- -------
Deferred tax liabilities
Lease transactions $ 8,128 $ 9,345
Depreciation 29,356 27,904
All other 5,423 5,909
------- -------
$42,907 $43,158
------- -------
</TABLE>
A deferred tax asset for foreign operations was established, upon the
adoption of SFAS 109, for excess capital allowances and net operating loss
carryovers which are related to a Canadian subsidiary. This deferred tax
asset was largely offset by a valuation allowance. As a result of the
regionalization and legal entity restructuring of Canadian operations, the
company reduced the valuation allowance by $279,000 and $6.0 million in
1994 and 1993, respectively, primarily due to the realization of Canadian
tax benefits.
A reconciliation of the statutory U.S. Federal income tax rate of 35%
in 1994 and 1993 and 34% in 1992 to the company's effective tax rate for
each year is shown below:
<TABLE>
<CAPTION>
(IN THOUSANDS) 1994 1993 1992
<S> <C> <C> <C>
Income taxes at
statutory rate $52,315 $40,437 $34,371
Effect of foreign operations (1,112) 720 1,305
State and local taxes, net
of federal benefit 2,737 1,949 2,757
Canadian restructuring benefit (279) (6,000)
Jobs and other tax credits (722) (456) (1,785)
Tax-exempt interest (616) (537) (756)
Goodwill amortization 407 526 388
Other (415) (371) 112
-------- ------- -------
Income taxes at effective rate $52,315 $36,268 $36,392
-------- ------- -------
</TABLE>
5. STOCK OPTION AND SHAREHOLDER RIGHTS PLANS
The company has various stock option plans which provide options for
certain employees and outside directors to purchase common shares of the
company. Grants of options to employees and the periods during which such
options can be exercised are at the discretion of the Board of Directors.
Grants of options to outside directors and the periods during which such
options can be exercised are specified in the plan applicable to directors
and do not involve discretionary authority of the Board. All options expire
at the end of the exercise period. Options are granted at the fair market
value of the company's common shares on the date of grant and no amounts
applicable thereto are reflected in net income. The company makes no
recognition of the options in the financial statements until they are
exercised.
On August 2, 1990, the Board of Directors adopted the WeShare Stock
Option Plan (WeShare Plan), a non-qualified stock option plan to provide
for grants of options equal to ten percent of each eligible employee's
earnings, with a minimum of 20 options to be made to each eligible employee
annually. An aggregate of 4.0 million common shares of the company have
been reserved pursuant to the WeShare Plan.
22
<PAGE>
The options have a term of ten years from the grant date and become
exercisable in installments of 25 percent on each of the first four
anniversaries of the grant date. On August 9, 1994, August 5, 1993, and
July 30, 1992, approximately 865,000 options, 860,000 options, and 950,000
options were granted to eligible employees at an exercise price of $15.38
per share, $14.38 per share, and $11.69 per share, respectively.
In addition, the Board of Directors also adopted the 1990 Stock Option
Plan (1990 Plan) on August 2, 1990, and amended the 1990 Plan on August 1,
1991, and February 23, 1994. An aggregate of 12.5 million common shares of
the company have been reserved for issuance to key employees and outside
directors under the 1990 Plan, as amended. On August 9, 1994, August 5,
1993, and July 30, 1992, approximately 1.3 million options, 1.1 million
options, and 1.0 million options were granted to key employees at an
exercise price of $15.38 per share, $14.38 per share, and $11.69 per share,
respectively.
The following is a summary of stock option activity for the last three
years:
<TABLE>
<CAPTION>
Shares Under Option Price
(SHARES IN THOUSANDS) Option Per Share
<S> <C> <C>
Balance at December 29, 1991 8,797 $ 4.06-$10.44
Granted 2,038 11.69- 13.69
Exercised (1,445) 5.13- 9.87
Cancelled (498)
------ -------------
Balance at January 3, 1993 8,892 4.06- 13.69
Granted 2,091 12.56- 16.44
Exercised (1,882) 4.13- 12.56
Cancelled (560)
------ -------------
Balance at January 2, 1994 8,541 4.06- 16.44
Granted 2,500 14.38- 18.06
Exercised (964) 4.06- 14.38
Cancelled (423)
------ -------------
Balance at January 1, 1995 9,654 $ 5.13-$18.06
------ -------------
</TABLE>
Options exercisable to purchase common shares totaled 4.6 million, 3.1
million, and 2.7 million at January 1, 1995, January 2, 1994, and January
3, 1993, respectively. Shares reserved under the plans at each year-end
were 14.1 million in 1994, 10.5 million in 1993, and 12.4 million in 1992.
The company has a Shareholder Rights Plan which provides for the
distribution of one preferred stock purchase right (Right), as a dividend
for each outstanding common share. Each Right entitles a shareholder to buy
one ten-thousandth of a share of a new series of preferred stock for $25
upon the occurrence of certain events. Rights would be exercisable once a
person or group acquires 20 percent or more of the company's common shares,
or ten days after a tender offer for 20 percent or more of the common
shares is announced. No certificates will be issued unless the Rights Plan
is activated.
Under certain circumstances, all Rights holders, except the person or
company holding 20 percent or more of the company's common shares, will be
entitled to purchase common shares at about half the price that such shares
traded for prior to the announcement of the acquisition. Alternatively, if
the company is acquired after the Rights plan is activated, the Rights will
entitle the holder to buy the acquiring company's shares at a similar
discount. The company can redeem the Rights for one cent per Right under
certain circumstances. If not redeemed, the Rights will expire on August
10, 1998.
6. ACQUISITIONS
During 1994, the company acquired 29 restaurants in the Kansas City
market for cash of $10.5 million and the assumption of certain liabilities.
The company acquired four other domestic restaurants from franchisees for
$2.3 million during 1994.
In 1993 and 1992, the company acquired 33 domestic restaurants and 13
domestic and nine Canadian restaurants for a total of $8.7 million and $7.6
million, respectively.
7. DISPOSITIONS
In 1994, the company franchised 49 domestic restaurants. The company
franchised 86 domestic restaurants and 42 domestic and two Canadian
restaurants in 1993 and 1992, respectively. These transactions resulted in
pretax gains of approximately $11.6 million, $8.1 million, and $7.7 million
in 1994, 1993, and 1992, respectively, and are included in other revenues.
Notes receivable related to dispositions were $25.9 million at January
1, 1995, and $23.0 million at January 2, 1994, and are included in notes
receivable and other assets.
8. COMMITMENTS AND CONTINGENCIES
At January 1, 1995, and January 2, 1994, the company's reserves
established for doubtful royalty receivables were $4.2 million and $5.3
million, respectively. Reserves related to possible losses on notes
receivable, real estate, guarantees, claims, and contingencies involving
franchisees totaled $3.5 million at January 1, 1995, and $3.0 million at
January 2, 1994. These reserves are included in accounts receivable, notes
receivable, other assets, and other accrued expenses.
The company has guaranteed certain leases and debt payments of
franchise owners with average annual obligations of $9.2 million over the
next five years. In the event of default by a franchise owner, the company
generally retains the right to acquire possession of the related
restaurants.
The company is self-insured for most workers' compensation, general
liability, and automotive liability losses subject to per occurrence and
aggregate annual liability limitations. The company is also self-insured
for health care claims for eligible participating employees subject to
certain deductibles and limitations. The company determines its liability
for claims incurred but not reported on an actuarial basis.
23
<PAGE>
The company has entered into long-term purchase agreements with some
of its suppliers.The range of prices and volume of purchases under the
agreements may vary according to the company's demand for the products and
fluctuations in market rates.
The company and its subsidiaries are parties to various legal actions
and complaints arising in the ordinary course of business; many of these
are covered by insurance. It is the opinion of the company that such
matters will not materially affect the company's financial condition or
earnings.
9. RETIREMENT PLANS
The company's retirement program covers substantially all full-time
employees qualified as to age and service. The program includes a
contributory defined benefit pension plan and a defined contribution plan
for management and administrative employees. The defined benefit pension
plan allows for employee contributions and provides a matching benefit from
the company in addition to a basic benefit which is independent of employee
contributions. The pension plan also provides for a guaranteed rate of
return on employee account balances. The defined contribution plan provides
for an annual discretionary contribution which is determined each year by
the Board of Directors. In addition, the retirement program includes a
noncontributory defined benefit pension plan for all eligible crew
employees and shift managers of the company.
The company also has supplemental retirement plans for certain key
employees to replace benefits otherwise not available from the pension and
profit sharing plans due to the limitations imposed under the Internal
Revenue Code and to assure that projected benefit levels were not decreased
by the changes to the retirement program which were implemented January 1,
1989.
The funded status of the pension plans for each year-end consisted of
the following:
<TABLE>
<CAPTION>
(IN THOUSANDS) 1994 1993
<S> <C> <C>
Accumulated benefit obligation:
Vested $(27,537) $(26,387)
Nonvested $(2,978) $(3,408)
Projected benefit obligation $(32,700) $(32,731)
Fair value of plan assets 29,822 28,097
Unrecognized net transition asset (384) (576)
Unrecognized net loss 8,047 7,677
Unrecognized prior service costs 189 708
Minimum pension adjustment (5,390) (4,873)
--------- ---------
Pension liability $ (416) $ (1,698)
--------- ---------
</TABLE>
In determining the present value of benefit obligations, discount
rates of 8.0% and 7.0% were used in 1994 and 1993, respectively. The net
effect of changes in actuarial assumptions resulted in a $1.0 million
reduction of pension expense for 1992. The expected long-term rate of
return on assets used was 8.5% in 1994 and 1993. The assumed rate of
increase in compensation levels was 8.0% for 1994 and 1993. Plan assets as
of January 1, 1995, consisted of debt and equity instruments and cash and
cash equivalents.
Net periodic pension cost for each year consisted of the following:
<TABLE>
<CAPTION>
(IN THOUSANDS) 1994 1993 1992
<S> <C> <C> <C>
Service cost $ 3,761 $ 3,326 $2,935
Interest cost on projected
benefit obligation 2,432 2,165 1,672
Return on plan assets 564 (1,607) (939)
Net amortization (3,139) (142) (442)
------- ------- -------
$ 3,618 $ 3,742 $3,226
------- ------- -------
</TABLE>
The company provided for profit sharing and supplemental retirement
benefits of $2.8 million, $2.3 million, and $1.9 million for 1994, 1993,
and 1992, respectively.
A minimum pension liability equal to the excess of the accumulated
benefit obligation over the fair value of plan assets and liabilities
already accrued is reflected in the balance sheet by recording an
intangible asset and reducing shareholders' equity.
The company has an agreement with the Chairman of the Board which
provides for severance pay and commencement of retirement benefits if he
terminates employment for any reason. Upon termination the agreement
requires the executive to be available for consultation and prohibits him
from competing against the company for a two-year period. The agreement
also provides that the company may require him to return to active
employment for up to 12 months under certain circumstances. Retirement by
the executive in 1995 would result in an expense charge of approximately
$3.1 million.
10. WENDY'S NATIONAL ADVERTISING PROGRAM
The Wendy's National Advertising Program, Inc. (WNAP) is a
not-for-profit corporation which was established to collect and administer
funds contributed by the company and all domestic franchise owners. These
contributions total 2% of net sales and are used for advertising programs
designed to increase sales and enhance the reputation of the company and
its franchise owners. For 1995, 1994, and 1993, the domestic system agreed
to increase national advertising spending from 2% to 2.5% of net sales.
During 1994, 1993, and 1992, the company contributed $29.0 million, $27.7
million, and $20.7 million, respectively, to WNAP. These contributions were
recognized in company restaurant operating costs. At January 1, 1995, and
January 2, 1994, the company's payable to WNAP amounted to $2.2 million and
$2.1 million, respectively.
24
<PAGE>
11. QUARTERLY FINANCIAL DATA (UNAUDITED)
The following is a summary of selected quarterly financial data:
<TABLE>
<CAPTION>
Quarter First Second Third Fourth
(IN THOUSANDS EXCEPT PER SHARE DATA) 1994 1993 1994 1993 1994 1993 1994 1993
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues $319,790 $310,371 $367,204 $345,160 $359,350 $338,890 $351,513 $325,674
Company restaurant
operating profit 37,968 35,840 54,698 47,156 52,366 46,169 48,989 44,574
Net income 12,486 9,839 33,348 27,352 29,764 24,484 21,558 17,592
Primary earnings per share .12 .10 .32 .27 .29 .24 .21 .17
Fully diluted earnings per share .12 .10 .31 .26 .28 .23 .20 .17
</TABLE>
-------------------------------------------------------------------------------
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
-------------------------------------------------------------------------------
ITEMS 10, 11, 12, AND 13. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT;
EXECUTIVE COMPENSATION; SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT; AND CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by these Items, other than the information set
forth following Item 4 under "Executive Officers of the Registrant", is
omitted and incorporated herein by reference from the Company's Definitive
Proxy Statement dated March 8, 1995. However, no information set forth in
the Definitive Proxy Statement regarding the Report of the Compensation
Committee on Executive Compensation (pages 10-16) or the performance graph
(pages 16-17) shall be deemed incorporated by reference into this Form
10-K.
PART IV
-------------------------------------------------------------------------------
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) (1) and (2) - The response to this portion of Item 14 is submitted as
a separate section of this report - See Index to Consolidated
Financial Statements and Schedules.
(3) Listing of Exhibits - See Index to Exhibits.
The following management contracts or compensatory plans or
arrangements are required to be filed as exhibits to this report:
Sample Key Executive Agreement between the Company and Messrs.
Thomas and Near.
Sample New Key Executive Agreement between the Company and
Messrs. Brownley, Condos, Laudick, Ourant, Rath, Schauf, Teter,
and Wright.
Sample New Key Executive Agreement between the Company and
Messrs. Casey and Musick.
Sample Separation and Consulting Agreement between the Company
and Mr. Near.
Agreement between the Company and Mr. Teter.
Senior Executive Earnings Maximization Plan.
Description of Earnings Maximization Plan.
Description of Management Incentive Plan.
Supplemental Executive Retirement Plan, as amended.
1978 Non-Qualified Stock Option Plan, as amended.
1982 Stock Option Plan, as amended.
1984 Stock Option Plan, as amended.
1987 Stock Option Plan, as amended.
1990 Stock Option Plan, as amended.
Wendy's WeShare Stock Option Plan, as amended.
(b) No reports on Form 8-K were filed during the quarter ended January 1,
1995.
(c) Exhibits filed with this report are attached hereto.
(d) Financial Statement Schedules - The response to this portion of Item
14 is submitted as a separate section of this report - See Index to
Consolidated Financial Statements and Schedules.
25
<PAGE>
-------------------------------------------------------------------------------
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
Wendy's International, Inc.
By /s/ JOHN K. CASEY 3/30/95
--------------------------------
John K. Casey
Vice Chairman and
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
/s/ R. DAVID THOMAS* 3/30/95 /s/ JAMES W. NEAR* 3/30/95
------------------------------------ -------------------------------------
R. David Thomas, Senior James W. Near, Chairman of the
Chairman of the Board and Board, Director
Founder, Director
/s/ JOHN K. CASEY 3/30/95 /s/ GORDON F. TETER* 3/30/95
------------------------------------ -------------------------------------
John K. Casey, Vice Chairman Gordon F. Teter, President,
and Chief Financial Officer, Chief Executive Officer and
Director Chief Operating Officer, Director
/s/ RONALD E. MUSICK* 3/30/95 /s/ LAWRENCE A. LAUDICK* 3/30/95
------------------------------------ -------------------------------------
Ronald E. Musick, Executive Vice Lawrence A. Laudick,Vice
President, Director President, General Controller
and Assistant Secretary
/s/ W. CLAY HAMNER* 3/30/95 /s/ ERNEST S. HAYECK* 3/20/95
------------------------------------ -------------------------------------
W. Clay Hamner, Director Ernest S. Hayeck, Director
/s/ JANET HILL* 3/30/95 THOMAS F. KELLER* 3/30/95
------------------------------------ -------------------------------------
Janet Hill, Director Thomas F. Keller, Director
/s/ FIELDEN B. NUTTER, SR.* 3/18/95 /s/ JAMES V. PICKETT* 3/21/95
------------------------------------ -------------------------------------
Fielden B. Nutter, Sr., Director James V. Pickett, Director
/s/ FREDERICK R. REED* 3/21/95 /s/ THEKLA R. SHACKELFORD* 3/30/95
------------------------------------ -------------------------------------
Frederick R. Reed, Director Thekla R. Shackelford, Director
*By /s/ JOHN K. CASEY 3/30/95
-------------------------------------
John K. Casey
Attorney-in-Fact
26
<PAGE>
WENDY'S INTERNATIONAL, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES
-------------------------------------------------------------------------------
ITEM 14 (a) (1) AND (2)
The following Consolidated Financial Statements of Wendy's International,
Inc. and Subsidiaries are included in Item 14(a).
Consolidated Statement of Income - Years ended January 1, 1995, January 2,
1994, and January 3, 1993.
Consolidated Balance Sheet - January 1, 1995, and January 2, 1994.
Consolidated Statement of Cash Flows - Years ended January 1, 1995,
January 2, 1994, and January 3, 1993.
Consolidated Statement of Shareholders' Equity - Years ended January 1,
1995, January 2, 1994, and January 3, 1993.
Notes to the Consolidated Financial Statements.
The following Consolidated Financial Statement Schedule of Wendy's
International, Inc. and Subsidiaries is included in Item 14(d):
II - Valuation and Qualifying Accounts
All other schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission are not
required under the related instructions, are inapplicable, or the
information has been disclosed elsewhere.
REPORT OF INDEPENDENT ACCOUNTANTS
-------------------------------------------------------------------------------
TO THE SHAREHOLDERS OF
WENDY'S INTERNATIONAL, INC.
We have audited the consolidated financial statements and financial
statement schedule of Wendy's International, Inc. and Subsidiaries listed
in Item 14(a) of this Form 10-K. These financial statements and financial
statement schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
the financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Wendy's
International, Inc. and Subsidiaries as of January 1, 1995, and January 2,
1994, and the consolidated results of their operations and their cash flows
for the years ended January 1, 1995, January 2, 1994, and January 3, 1993,
in conformity with generally accepted accounting principles. In addition,
in our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information required to be
included therein.
Columbus, Ohio COOPERS & LYBRAND L.L.P.
February 23, 1995
27
<PAGE>
-------------------------------------------------------------------------------
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Registration Statements
of Wendy's International, Inc. and Subsidiaries on Form S-3 (File Nos.
33-39525 and 33-57101), and Form S-8 (File Nos. 2-67253, 2-98696, 33-18177,
2-82823, 33-36602, 33-36603, and 33-57913) of our report dated February 23,
1995 on our audits of the consolidated financial statements and financial
statement schedule of Wendy's International, Inc. and Subsidiaries as of
January 1, 1995, and January 2, 1994, and for the years ended January 1,
1995, January 2, 1994, and January 3,1993, which report is included in this
Annual Report on Form 10-K.
Columbus, Ohio COOPERS & LYBRAND L.L.P.
March 30, 1995
28
<PAGE>
-------------------------------------------------------------------------------
WENDY'S INTERNATIONAL, INC. AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS (IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE AT CHARGED (CREDITED) BALANCE AT
BEGINNING TO COSTS & ADDITIONS END OF
CLASSIFICATION OF YEAR EXPENSES (DEDUCTIONS) YEAR
<S> <C> <C> <C> <C>
Fiscal year ended January 1, 1995:
Reserve for royalty receivables $ 5,273 $ (331) $ (770) (a) $ 4,172
Reserve for possible franchise-
related losses & contingencies 3,015 998 (487) (a) 3,526
-------- ------- ------- -------
$ 8,288 $ 667 $(1,257) $ 7,698
-------- ------- ------- -------
Fiscal year ended January 2, 1994:
Reserve for royalty receivables $ 6,418 $ 881 $(2,026) (a) $ 5,273
Reserve for possible franchise-
related losses & contingencies 4,030 (1,628) 613 (a) 3,015
-------- ------- ------- -------
$10,448 $ (747) $(1,413) $ 8,288
-------- ------- ------- -------
Fiscal year ended January 3, 1993:
Reserve for royalty receivables $ 7,044 $ 250 $ (876) (a) $ 6,418
Reserve for possible franchise-
related losses & contingencies 5,673 (795) (848) (a) 4,030
Reserve for realignment 394 (394) (b)
-------- ------- ------- -------
$13,111 $ (545) $(2,118) $10,448
-------- ------- ------- -------
-------- ------- ------- -------
<FN>
(a) Primarily represents reserves written off or reversed or transferred
due to the resolution of certain franchise situations.
(b) Realignment activity for the year.
</TABLE>
Year-end balances are reflected in the Consolidated Balance Sheets as
follows:
<TABLE>
<CAPTION>
JANUARY 1, JANUARY 2, JANUARY 3,
1995 1994 1993
<S> <C> <C> <C>
Deducted from accounts receivable $ 4,026 $ 5,180 $ 6,125
Deducted from notes receivable 755 452 1,099
Deducted from other assets 2,273 1,881 2,769
Included in accrued expenses - other 644 775 455
---------- --------- ---------
$ 7,698 $ 8,288 $10,448
---------- --------- ---------
</TABLE>
29
<PAGE>
-------------------------------------------------------------------------------
WENDY'S INTERNATIONAL, INC. AND SUBSIDIARIES
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION PAGE NO.
<S> <C> <C>
3(a) Articles of Incorporation, as amended to Incorporated herein by reference from
date Exhibit 3(a) of Form 10-K for the year
ended January 3, 1993.
(b) New Regulations, as amended Incorporated herein by reference from
Exhibit 3(b) of Form 10-K for the year
ended January 3, 1993.
*4(a) Indenture between the Company and Incorporated herein by reference from
The Huntington National Bank pertaining Form S-3 Registration Statement, File No.
to 7% convertible subordinated debentures 33-39525.
due 2006
(b) Preferred Stock Purchase Rights Agreement Incorporated herein by reference from
between the Company and Morgan Form 8-A Registration Statement, File
Shareholder Services Trust Company No. 1-8116.
10(a) Sample Key Executive Agreement between Incorporated herein by reference from
the Company and Messrs. Thomas and Exhibit 10(a) of Form 10-K for the year
Near. The Employment Term is ten years ended January 3, 1993.
for Mr. Thomas and five years for Mr. Near
(b) Sample New Key Executive Agreement Incorporated herein by reference from
between the Company and Messrs. Exhibit 10(b) of Form 10-K for the year
Brownley, Condos, Laudick, Ourant, ended January 3, 1993.
Rath, Schauf, Teter, and Wright
(c) Sample New Key Executive Agreement Incorporated herein by reference from
between the Company and Messrs. Casey Exhibit 10(c) of Form 10-K for the year
and Musick ended January 3, 1993.
(d) Sample Separation and Consulting Incorporated herein by reference from
Agreement between the Company and Exhibit 10(d) of Form 10-K for the year
Mr. Near ended January 3, 1993.
(e) Agreement between the Company 32-36
and Mr. Teter
(f) Senior Executive Earnings Incorporated herein by reference from the
Maximization Plan Company's Definitive Proxy Statement,
dated March 11, 1994.
(g) Description of Earnings Maximization Plan Incorporated herein by reference from
Exhibit 10(f) of Form 10-K for the year
ended January 3, 1993.
(h) Description of Management Incentive Plan Incorporated herein by reference from
Exhibit 10(g) of Form 10-K for the year
ended January 3, 1993.
(i) Supplemental Executive Retirement Plan, Incorporated herein by reference from
as amended Exhibit 10(h) of Form 10-K for the year
ended January 3, 1993.
(j) 1978 Non-Qualified Stock Option Plan, Incorporated herein by reference from
as amended the Company's Definitive Proxy
Statement, dated March 11, 1994.
<FN>
* Neither the Company nor its subsidiaries are party to any other instrument
with respect to long-term debt for which securities authorized thereunder
exceed 10 percent of the total assets of the Company and its subsidiaries
on a consolidated basis. Copies of instruments with respect to long-term
debt of lesser amounts will be furnished to the Commission upon request.
</TABLE>
30
<PAGE>
<TABLE>
<S> <C> <C>
(k) 1982 Stock Option Plan, as amended Incorporated herein by reference from
the Company's Definitive Proxy
Statement, dated March 11, 1994.
(l) 1984 Stock Option Plan, as amended Incorporated herein by reference from
the Company's Definitive Proxy
Statement, dated March 11, 1994.
(m) 1987 Stock Option Plan, as amended Incorporated herein by reference from
the Company's Definitive Proxy
Statement, dated March 11, 1994.
(n) 1990 Stock Option Plan, as amended Incorporated herein by reference from
the Company's Definitive Proxy
Statement, dated March 11, 1994.
(o) Wendy's WeShare Stock Option Plan, Incorporated herein by reference from
as amended Exhibit 10(o) of Form 10-K for the year
ended January 2, 1994.
11 Computation of Net Income Per Share 37-38
22 Subsidiaries of the Registrant 39
23 Consent of Coopers & Lybrand L.L.P. Incorporated by reference to page 28
of this Form 10-K.
24 Powers of Attorney 40-52
</TABLE>
31
3<PAGE>
WENDY'S INTERNATIONAL, INC. AND SUBSIDIARIES
EXHIBIT 10(e)
AGREEMENT
This Agreement, made and effective this 1st day of March, 1995, by and
between Wendy's International, Inc., an Ohio Corporation (the
"Corporation") with its principal place of business in Dublin, Ohio, and
Gordon F. Teter (the "Executive") residing in Powell, Ohio.
WHEREAS, the Executive currently serves as Chief Executive Officer,
President and Chief Operating Officer of the Corporation;
WHEREAS, the Executive has been employed by the Corporation or its
subsidiaries since September 8, 1987 and has made significant professional
and personal contributions to the successful operation and recognized good
will and reputation of the Corporation; and
WHEREAS, the Corporation wishes, at the time the Executive ceases to be
actively employed by the Corporation:
(a) to encourage the Executive to provide advice and counsel to the
Corporation for a reasonable period of time following his active employment
by the Corporation;
(b) to discourage the Executive from entering into business activities
which are in competition with the Corporation's businesses for a reasonable
period of time following his active employment by the Corporation, or
engaging in activities which may constitute a conflict of interest; and
(c) to provide the Executive with certain remuneration in consideration
for the foregoing.
NOW, THEREFORE, it is agreed as follows:
1. (a) If the Executive ceases to be actively employed by the
Corporation after his attainment of age 62 and prior to his attainment of
age 65 for any reason other than by reason of his termination of employment
for Cause (as such term is defined in Section 8 hereof), whether
voluntarily or involuntarily, the Corporation will pay to him during the
Transition Period (as defined below) compensation, at the rate of his
highest annual base salary in effect at any time during the five-year
period preceding the date of such cessation (the "Transition Date"), such
compensation to be paid in accordance with the Corporation's normal payroll
practices in effect at that time. The "Transition Period" is the period
beginning on the Transition Date and ending on the earliest of (i) 24
months after the Transition Date, (ii) his death, or (iii) his attainment
of age 65. If the Transition Period terminates by reason of the
Executive's death, the remaining payments of base salary that would have
been paid had the Transition Period terminated pursuant to clause (i) or
(iii), as applicable, shall be paid as soon as practical after the
Executive's death in a lump sum (without discount) to his wife, if she is
alive on the date of his death. If the Executive has no wife that survives
him, such lump sum shall be paid to the Executive's beneficiary or
beneficiaries as designated in writing and filed with the Corporation, or
if no designation has been filed, to the Executive's estate.
(b) To the extent permitted by law, the Executive will continue to
participate during the Transition Period in the Corporation's retirement,
medical, dental, life, accidental death and dismemberment, short-term and
long-term disability and any other group insurance plans, if any, in which
he is a participant immediately preceding the Transition Date, and the
company-owned vehicle program as in effect on the Transition Date
(including the reimbursement for the lease and maintenance of a company car
or the receipt of a car allowance in lieu thereof, the use of the
Corporation's gasoline credit card and the option to purchase his company
car at the end of the Transition Period at a price to be determined by the
Corporation in accordance with the terms of the program as in effect at
that time), but will not participate in any bonus, incentive compensation
or stock option or other stock-based compensation plans; provided, however,
that (i) the Executive shall be entitled to exercise employee stock options
or other stock-based awards already granted in accordance with the terms of
the grant letters and the applicable stock option or other stock-based
compensation plans based on his continued employment with the Corporation
during the Transition Period, but no new grants of stock options or other
stock-based compensation awards shall be made to the Executive on or after
the Transition Date, (ii) the Executive will be entitled to receive a
pro-rated bonus under the Corporation's Senior Executive Earnings
Maximization Plan (or the Corporation's then current annual cash bonus
plan) in respect of the fiscal year in which the Transition Date occurs
based on the number of complete calendar months that have elapsed in such
year through the Transition Date and (iii) any benefits the Executive
receives under the Corporation's short-term or long-term disability plans
during the Transition Period will reduce the amount payable pursuant to
Section 1(a) of this Agreement.
(c)(1) No amount shall be payable pursuant to paragraphs (a) and (b) of
this Section 1 if the Executive ceases to be actively employed by the
Corporation for any reason prior to his attainment of age 62 or after his
attainment of age 65. However, in the event the Executive ceases to be
actively employed by the Corporation prior to his attainment of age 62 for
any reason other than by reason of his voluntary
32
<PAGE>
termination of employment, his death or termination of his employment by
the Corporation for Cause (as such term is defined in Section 8 hereof),
subject to subparagraph (c)(3) below, the Executive shall be entitled to
receive the following payments and benefits: (i) the continuation of his
base salary at the rate in effect at the time of such cessation of active
employment (the "Cessation Date") for 24 months following such cessation
(the "Payment Period") to be paid in accordance with the Corporation's
normal payroll practices in effect at that time; provided, however, that
the Executive shall be entitled to elect to receive the balance of such
salary continuation as a lump sum payment, without discount, at any time
during the payment Period; (ii) to the extent permitted by law, the
Executive will continue to participate during the Payment Period in the
Corporations's retirement, medical, dental, life and accidental death and
dismemberment plans in which he is a participant immediatley preceding the
Cessation Date, but will not participate in any bonus, incentive
compensation or stock option or other stock-based compensation plans;
provided, however, that (a) the Executive shall be entitled to exercise
employee stock options or other stock-based awards already granted in
accordance with the terms of the grant letters and the applicable stock
option or other stock-based compensation plans during the Payment Period,
but no new grants of stock options or other stock-based compensation
awards shall be made to the Executive on or after the Cessation Date and
(b) the Executive will be entitled to receive a pro-rated bonus under the
Corporations's Senior Executive Earnings Maximization Plan (or the
Corporation's then current annual cash bonus plan) in respect of the
fiscal year in which the Cessation Date occurs based on the number of
complete calendar months that have elapsed in such year through the
Cessation Date; (iii) the Executive shall also continue to participate in
the company-owned vehichle program as in effect on the Cessation Date
(including the reimbursement for the lease and maintenance of a company
car or the receipt of a car allowance in lieu thereof, the use of the
Corporation's gasoline credit card and the option to purchase his company
car at the end of the Payment Period at a price to be determined by the
Corporation in accordance with the terms of the program in effect at that
time); and (iv) a payment for any accrued, unused vacation for the year
in which the Cessation Date occurs. Notwithstanding any of the foregoing,
any benefits the Executive receives under the Corporation's short-term or
long-term disability plans during the Payment Period will reduce the
amount payable pursuant to clause (i) of this Section 1(c).
(2) In the event that the Executive accepts new employment during the
Payment Period, he hereby agrees to notify the Corporation immediately. At
the time he accepts such employment, he will receive a lump sum payment
representing the balance of the salary continuation for the remainder of
the Payment Period, without discount. Upon the Executive's receipt of a
lump sum payment of his salary continuation during the Payment Period for
any reason, all of his other benefits provided in subsections (ii) and
(iii) of the preceding paragraph shall immediately terminate.
(3) The Executive's receipt of the benefits provided in this subsection
(c) are subject to the execution of a general release in favor of the
Corporation in the form then in use by the Corporation in connection with
terminations of its employees.
2. (a) The Corporation shall establish a bookkeeping account for the
Executive which shall be referred to as the "Supplemental SERP Account." As
of the last day of 1995 and of each subsequent calendar year ending with
the calendar year in which the Transition Date occurs (but in no event
beyond the calendar year in which the Executive attains age 65) or, if the
Executive's employment with the Corporation terminates for any reason prior
to his attainment of age 62, the calendar year preceding the calendar year
in which such termination of employment occurs, the Corporation shall
credit to the Supplemental SERP Account the sum of the following amounts:
(i) an amount equal to .8% of the Executive's "Compensation" (as defined in
the Wendy's International, Inc. Pension Plan, as in effect from time to
time (the "Pension Plan"), but without regard to the dollar limitation
imposed thereon under Section 401(a)(17) of the Internal Revenue Code of
1986, as amended (the "Code") or any successor provision thereto), and (ii)
an amount equal to the Supplemental SERP Contribution (as defined below).
As of the end of each calendar year prior to the calendar year in which the
balance in the Supplemental SERP Account is distributed or commences to be
distributed and as of the end of the calendar quarter preceding the date
the Supplemental SERP Account is distributed or commences to be
distributed, the Supplemental SERP Account shall be credited with interest
(on the balance of the Supplemental SERP Account as of the end of the
preceding calendar year) at the rate credited on the "Account Balance
Benefit" (as defined in the Pension Plan) for such calendar year or portion
of a calendar year, as applicable( the "Pension Plan Interest Rate"). For
purposes of this Agreement, the "Supplemental SERP Contribution" for any
calendar year is the amount equal to the excess of (i) the amount (other
than interest) that would be credited for the calendar year to the
Executive's "Supplemental Target Account" (as defined in the Wendy's
International, Inc. Supplemental Executive Retirement Plan ("SERP")) if, in
computing the contributions for the SERP, (A) the targeted annual benefit
was based on the Executive's expected "Final Average Compensation" (as
defined in the SERP) at age 62 (or, if the Executive's employment continues
after he attains age 62, his attained age at the end of that calendar year)
rather than age 60, and (B) the offsets provided for under Section
3.1(a)(2)-(5) of the SERP were projected to the Executive's age 62 (or, if
the Executive's employment continues after he attains age 62, his attained
age at the end of that calendar year) rather than the Executive's normal
retirement date over (ii) the amount (other than interest) actually
credited to the Executive's Supplemental Target Account under the SERP for
the calendar year.
33
<PAGE>
(b) The Supplemental SERP Account shall be distributed to the Executive in
a lump sum (i) if the Executive terminates his employment with the
Corporation prior to age 62, as soon as practical after the close of the
calendar year in which such termination occurs, or (ii) if the Executive
terminates his employment with the Corporation on or after age 62, as soon
as practical after the close of the calendar year in which the Transition
Period ends (or if later, the end of the calendar year in which the
Executive terminates employment); provided, however, that the Compensation
Committee of the Board of Directors, or any successor committee thereto, in
its sole discretion may distribute the Supplemental SERP Account prior to
the end of the calendar year in which the Executive's termination of
employment occurs or in which the end of the Transition Period occurs, as
the case may be; provided further, however, that in lieu of a lump sum
distribution, the Executive may elect, at any time prior to 12 months
before his scheduled benefit commencement date, to have the Supplemental
SERP Account distributed over a period not exceeding the joint and last
survivor life expectancies of the Executive and his spouse (the
"Installment Election"). Any such election may be changed prior to the
date 12 months before the Executive's scheduled benefit commencement date,
at which time the election shall become irrevocable. An Installment
Election shall specify the period over which the installments shall be made
and whether the distribution shall be made (A) in substantially equal
installments, in which case the amount of each installment will be
determined so that the present value of all installments, discounted for
interest only at the "Applicable Interest Rate" (within the meaning of
Section 417(e)(3) of the Code),equals the Supplemental SERP Account balance
as of the date of determination (the "Equal Installment Method"), or (B) in
annual installments in amounts determined by dividing the Supplemental SERP
Account balance as of the date of determination by the number of
installments remaining to be paid (the "Variable Installment Method").
In the event the Variable Installment Method is elected, the Supplemental
SERP Account will be credited with interest at the Pension Plan Interest
Rate at the end of each calendar year during the period of distribution
until all amounts are distributed.
(c) If the Executive dies prior to the distribution of the entire
Supplemental SERP Account, the balance of the Supplemental SERP Account as
of the date of his death shall be paid to the Executive's wife as soon as
practical after the Executive's death in a lump sum if she is alive on the
date of his death. If the Executive has no wife that survives him, such
payment shall be made to his estate; provided, however, that if the
Executive dies after the distribution of the Supplemental SERP Account has
commenced pursuant to the Equal Installment Method, such balance shall be
deemed to equal the present value of the installments remaining to be paid
at the time of his death discounted for interest only at the Applicable
Interest Rate.
(d) In the event that either the SERP or the Pension Plan, or both plans,
are amended or terminated at any time after the date hereof, such amendment
or termination shall not affect the computation of benefits under this
Agreement and this Agreement shall be construed as if the SERP and the
Pension Plan had been continued in accordance with their terms as in effect
as of the date hereof.
3. In the event the Executive elects to receive the distribution of his
Supplemental SERP Account in installments pursuant to the terms of Section
2(b), promptly after the expiration of the Transition Period or, if the
Executive terminates employment prior to the attainment age 62 or after the
attainment of age 65, promptly after the Executive's termination of
employment with the Corporation, the Corporation shall establish a "rabbi"
trust with an independent institutional trustee for the payment of the
benefits provided under Section 2 of this Agreement, and shall fund such
trust as soon as practical after it is established with an amount equal to
the balance then in the Supplemental SERP Account. Upon a Material Change
(as such term is defined in the Key Executive Agreement between the
Executive and the Corporation), the Corporation shall make an irrevocable
contribution to the trust in an amount equal to the then balance in the
Supplemental SERP Account. The trust shall be irrevocable but shall
provide that its assets will be part of the general assets of the
Corporation and available for the payment of the debts of the Corporation
in the event of the Corporation's insolvency or bankruptcy. In the event
that the principal of the trust, and any earnings thereon, are not
sufficient to make the installment payments in accordance with the terms of
Section 2 of this Agreement, the Corporation shall pay to the Executive
directly any shortfall as it becomes due. After all of the obligations
under Section 2 of this Agreement have been satisfied, any remaining assets
in the trust shall be returned to the Corporation.
4. During the Transition Period, the Executive will make himself
available to provide advice and counsel upon request by the Corporation at
reasonable frequencies, times and places mutually agreed upon by the
Executive and the Corporation.
5. The Executive and the Corporation each agree that they will give the
other party a minimum of six (6) months' notice in writing of the date
either intends to terminate the Executive's active employment, except in
the event the Executive is terminated by the Corporation for Cause (as such
term is defined in Section 8 hereof).
6. The Executive agrees that should an emergency occur during the
Transition Period that in the reasonable judgment of the Corporation's
Board of Directors (the "Board") constitutes a major threat to the
successful management of its business (such as the death or incapacity of
the Chairman of the Board or the President), and the Corporation should
call upon him to return to full-time active
34
<PAGE>
employment, he will do so for a reasonable period up to 12 months, under
conditions of compensation and benefits to be negotiated in good faith at
that time.
7. The Executive agrees that he will not, either directly or indirectly,
by or for himself or on behalf of or in conjunction with any other person,
company, partnership, corporation or other entity:
(a) During the Transition Period or, if his employment terminates prior to
the commencement of the Transition Period, during the period of two years
following the date of his termination of employment, participate as a
partner, joint venturer, officer, director, employee, or representative, or
have any direct financial interest in, any business or enterprise
conducting a quick service restaurant business in the United States, other
than a business or enterprise engaged in operating restaurants under a
franchise granted by the Corporation or any of its subsidiaries; provided,
however, that the ownership by Executive of securities of a public
corporation shall not be a violation of this subparagraph so long as (i)
the Executive does not own, directly or indirectly, more than five percent
(5%) of any class of the securities of such corporation, and (ii) the value
of such securities does not exceed ten percent (10%) of the net worth of
the Executive; and provided further, however, that ownership by the
Executive of securities of the Corporation, or any successor to the
Corporation or to substantially all of the business of the Corporation, by
merger or sale of substantially all of the assets of the Corporation, shall
not be a violation of this Subsection 7(a).
(b) Divulge, disclose, reveal or communicate to any person, firm,
corporation, partnership, joint venture or other entity, directly or
indirectly, any trade secrets or other information which the Executive may
have obtained during the course of his employment by the Corporation in
respect of any matters affecting or relating to the quick service
restaurant business of the Corporation or its subsidiaries, including,
without limitation, any of their plans, policies, business practices,
finances, recipes, methods of operation, franchises or other information
known to the Executive to be considered by the Corporation to be
confidential information.
8. The Executive agrees that, if (i) the Executive violates any of the
provisions of Sections 4, 5, 6 or 7 of this Agreement, or (ii) the
Executive's employment is terminated for Cause (as defined below), the
Corporation's obligation to pay the amounts or provide the benefits
provided for in Sections 1 and 2 of this Agreement shall terminate;
provided, however, that termination of the Corporation's obligations
pursuant to clause (i) above shall not occur unless the Corporation shall
have first provided written notice of the alleged violation to the
Executive and offered to arbitrate as provided in Section 13 of this
Agreement and the Executive shall have declined to so arbitrate within a
reasonable time after the Corporation's offer. For purposes of this
Agreement, "Cause" shall mean termination by reason of the Board's good
faith determination that the Executive (i) willfully and continually failed
to substantially perform his duties with the Corporation (other than a
failure resulting from the Executive's incapacity due to physical or mental
illness) after a written demand for substantial performance is delivered to
the Executive by the Board which specifically identifies the manner in
which the Board believes that the Executive has not substantially performed
his duties and such failure substantially to perform continues for at
least fourteen (14) days, or (ii) has willfully engaged in conduct which is
demonstrably and materially injurious to the Corporation, monetarily or
otherwise. No act, nor failure to act, on the Executive's part, shall be
considered "willful" unless he has acted, or failed to act with an absence
of good faith and without a reasonable belief that his action or failure
to act was in the best interest of the Corporation. Notwithstanding the
foregoing, the Executive's employment shall not be deemed to have been
terminated for Cause unless and until (1) there shall have been delivered
to the Executive a copy of written notice setting forth that the Executive
was guilty of conduct set forth above in clause (i) or (ii) of the first
sentence of this Section 8 and specifying the particulars thereof in
detail, and (2) the Executive shall have been provided an opportunity to
be heard by the Board (with the assistance of Executive's counsel).
9. If the Executive's termination of employment occurs after the
attainment of age 62 (whether before or after the commencement of the
Transition Period) under circumstances entitling him to receive benefits
under the Key Executive Agreement between the Executive and the
Corporation, no payments or further payments shall be made pursuant to
Section 1 of this Agreement unless the Executive waives all rights to any
payments or benefits under the Key Executive Agreement by an instrument in
writing delivered to the Corporation within five days after his termination
of employment.
10. All amounts which are payable pursuant to this Agreement shall be
subject to all applicable withholding and other employment taxes.
11. This Agreement may be modified or amended only by an instrument in
writing signed by both the Corporation and the Executive.
12. The validity, interpretation and construction of this Agreement shall
be governed by the laws of the State of Ohio.
35
<PAGE>
13. Any dispute or controversy arising under or in connection with this
Agreement shall be settled exclusively by arbitration in accordance with
the rules of the American Arbitration Association then in effect. Judgment
may be entered on the arbitrator's award in any court having jurisdiction.
The Corporation shall pay on a current basis all expenses (including
reasonable attorney's fees) incurred by Executive in connection with such
arbitration and the entering of such award.
14. The rights and obligations of the parties under this Agreement shall
inure to the benefit of and shall be binding upon the heirs, executors,
administrators, successors and assigns of the parties hereto.
IN WITNESS WHEREOF, the Corporation and Executive have executed this
Agreement on the day and year above first written.
EXECUTIVE: CORPORATION:
WENDY'S INTERNATIONAL, INC.
/s/ GORDON F. TETER /s/ JAMES W. NEAR
----------------------------- -------------------------
Gordon F. Teter By: James W. Near
Chief Executive Officer, President, Chairman of the Board
and Chief Operating Officer
/s/ LAWRENCE E. SCHAUF
-------------------------
Lawrence E. Schauf
Senior Vice President,
General Counsel and Secretary
36
<PAGE>
-------------------------------------------------------------------------------
WENDY'S INTERNATIONAL, INC. AND SUBSIDIARIES
EXHIBIT 11(A)
COMPUTATION OF PRIMARY EARNINGS PER COMMON SHARE
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Years Ended
January 1, January 2, January 3,
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Weighted average number of
common shares outstanding. . . . . . . . 101,272 99,436 98,095
Shares issuable pursuant to employee
stock option plans, less shares
assumed repurchased at the average
market price . . . . . . . . . . . . . . 2,966 3,461 3,319
------- ------- -------
Number of shares for computation of
primary earnings per share . . . . . . . 104,238 102,897 101,414
Net income . . . . . . . . . . . . . . . . $97,156 $79,267 $64,698
Less requirements of preferred stock
of subsidiary. . . . . . . . . . . . . . 65
------- ------- -------
Net income for computation of primary
earnings per share . . . . . . . . . . . $97,156 $79,267 $64,633
------- ------- -------
------- ------- -------
Primary earnings per share . . . . . . . . $.93 $.77 $.64
---- ---- ----
---- ---- ----
</TABLE>
37
<PAGE>
WENDY'S INTERNATIONAL, INC. AND SUBSIDIARIES
EXHIBIT 11(B)
COMPUTATION OF EARNINGS PER COMMON SHARE ASSUMING FULL DILUTION
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Years Ended
January 1, January 2, January 3,
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Weighted average number of
common shares outstanding. . . . . . . . 101,272 99,436 98,095
Shares issuable pursuant to employee
stock option plans, less shares assumed
repurchased at the higher of the
average market or period end price . . . 2,966 3,679 3,425
Additional dilutive shares issuable
assuming conversion of subordinated
debentures . . . . . . . . . . . . . . . 8,130 8,130 8,130
------- ------- -------
Number of shares for computation of
fully diluted earnings per share . . . . 112,368 111,245 109,650
Additional shares issuable assuming
conversion of subordinated debentures
per Regulation S-K item 601(b) (11). . . 1,724
------- ------- -------
Number of shares per Regulation S-K
item 601(b) (11) . . . . . . . . . . . . 112,368 111,245 111,374
Income applicable to common stock. . . . . $ 97,156 $79,267 $64,633
Add interest savings on assumed dilutive
conversion of subordinated
debentures, net of tax . . . . . . . . . 4,615 4,871 4,542
------- ------- -------
Net income for computation of
fully diluted earnings per share . . . . 101,771 84,138 69,175
Add interest savings on assumed
conversion of subordinated debentures
net of tax per Regulation S-K item
601(b) (11). . . . . . . . . . . . . . . 1,413
------- ------- -------
Net income for computation of fully
diluted earnings per share per
Regulation S-K item 601(b) (11). . . . . $101,771 $84,138 $70,588
------- ------- -------
------- ------- -------
Fully diluted earnings per share . . . . . $.91 $.76 $.63
---- ---- ----
---- ---- ----
Fully diluted earnings per share
Regulation S-K item 601(b) (11). . . . . $.91 $.76 $.63
---- ---- ----
---- ---- ----
</TABLE>
38
<PAGE>
-------------------------------------------------------------------------------
WENDY'S INTERNATIONAL, INC. AND SUBSIDIARIES
EXHIBIT 22
SUBSIDIARIES OF THE REGISTRANT
<TABLE>
<CAPTION>
JURISDICTION
OF INCORPORATION OR
ORGANIZATION
SUBSIDIARY COUNTRY STATE
<S> <C> <C>
Wendy's Old Fashioned Hamburgers of New York, Inc. U.S. Ohio
Wendy's Capital Corporation U.S. Virginia
Wendy Restaurant, Inc. U.S. Delaware
Wendy's of Denver, Inc. U.S. Colorado
The New Bakery Co. of Ohio, Inc. U.S. Ohio
Delavest, Inc. U.S. Delaware
Wentexas, Inc. U.S. Texas
Restaurant Finance Corporation U.S. Ohio
Wendco Northwest Limited U.S. Delaware
Progressive Rent-A-Car, Inc. U.S. Ohio
Wendy's Restaurants of Canada Inc. Canada
Wendy's of N.E. Florida, Inc. U.S. Florida
Wendy's Old Fashioned Hamburgers Restaurants
Pty. Ltd. Australia
Wendy's Restaurants (NZ) Limited New Zealand
Wendcreek Venture U.S. Florida
Wendco (N.Z.) Limited New Zealand
M & W (U.K.) Limited United Kingdom
WendServe (Korea), Inc. U.S. Delaware
Wendy's Restaurants of Canada (No. 1), Inc. U.S. Delaware
Wendy's Restaurants (Ireland) Limited Ireland
WendServe, Inc. U.S. Delaware
WENTIM CORPORATION U.S. Delaware
</TABLE>
39
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS: That the undersigned officer and/or
director of Wendy's International, Inc. (the "Company"), which is about to file
a Form 10-K with the Securities and Exchange Commission, under the provisions of
the Securities Exchange Act of 1934, as amended, hereby constitutes and appoints
John K. Casey and Lawrence A. Laudick as his or her true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him or her and in his or her name, place and stead, in any
and all capacities, to sign the Form 10-K, any and all amendments and documents
related thereto, and to file the same, and all exhibits thereto, and other
documents relating thereto, with the Securities and Exchange Commission, and
grants unto each of said attorneys-in-fact and substitute or substitutes full
power and authority to do each and every act and thing requested and necessary
to be done in and about the premises as fully to all intents and purposes as he
or she might do in person, and hereby ratifies and confirms all things that each
of said attorneys-in-fact and substitute or substitutes may lawfully do and seek
to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand this
30th day of March, 1995.
/s/ R. David Thomas
----------------------------------
R. David Thomas, Senior Chairman of
the Board & Founder, Director
40
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS: That the undersigned officer and/or
director of Wendy's International, Inc. (the "Company"), which is about to file
a Form 10-K with the Securities and Exchange Commission, under the provisions of
the Securities Exchange Act of 1934, as amended, hereby constitutes and appoints
John K. Casey and Lawrence A. Laudick as his or her true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him or her and in his or her name, place and stead, in any
and all capacities, to sign the Form 10-K, any and all amendments and documents
related thereto, and to file the same, and all exhibits thereto, and other
documents relating thereto, with the Securities and Exchange Commission, and
grants unto each of said attorneys-in-fact and substitute or substitutes full
power and authority to do each and every act and thing requested and necessary
to be done in and about the premises as fully to all intents and purposes as he
or she might do in person, and hereby ratifies and confirms all things that each
of said attorneys-in-fact and substitute or substitutes may lawfully do and seek
to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand this
30th day of March, 1995.
/s/ James W. Near
---------------------------
James W. Near, Chairman of the Board, Director
41
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS: That the undersigned officer and/or
director of Wendy's International, Inc. (the "Company"), which is about to file
a Form 10-K with the Securities and Exchange Commission, under the provisions of
the Securities Exchange Act of 1934, as amended, hereby constitutes and appoints
John K. Casey and Lawrence A. Laudick as his or her true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him or her and in his or her name, place and stead, in any
and all capacities, to sign the Form 10-K, any and all amendments and documents
related thereto, and to file the same, and all exhibits thereto, and other
documents relating thereto, with the Securities and Exchange Commission, and
grants unto each of said attorneys-in-fact and substitute or substitutes full
power and authority to do each and every act and thing requested and necessary
to be done in and about the premises as fully to all intents and purposes as he
or she might do in person, and hereby ratifies and confirms all things that each
of said attorneys-in-fact and substitute or substitutes may lawfully do and seek
to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand this
30th day of March, 1995.
/s/ Gordon F. Teter
-----------------------------
Gordon F. Teter, President, Chief Executive
Officer & Chief Operating Officer, Director
42
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS: That the undersigned officer and/or
director of Wendy's International, Inc. (the "Company"), which is about to file
a Form 10-K with the Securities and Exchange Commission, under the provisions of
the Securities Exchange Act of 1934, as amended, hereby constitutes and appoints
John K. Casey and Lawrence A. Laudick as his or her true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him or her and in his or her name, place and stead, in any
and all capacities, to sign the Form 10-K, any and all amendments and documents
related thereto, and to file the same, and all exhibits thereto, and other
documents relating thereto, with the Securities and Exchange Commission, and
grants unto each of said attorneys-in-fact and substitute or substitutes full
power and authority to do each and every act and thing requested and necessary
to be done in and about the premises as fully to all intents and purposes as he
or she might do in person, and hereby ratifies and confirms all things that each
of said attorneys-in-fact and substitute or substitutes may lawfully do and seek
to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand this
30th day of March, 1995.
/s/ Ronald E. Musick
----------------------------------
Ronald E. Musick,
Executive Vice President, Director
43
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS: That the undersigned officer and/or
director of Wendy's International, Inc. (the "Company"), which is about to file
a Form 10-K with the Securities and Exchange Commission, under the provisions of
the Securities Exchange Act of 1934, as amended, hereby constitutes and appoints
John K. Casey and Lawrence A. Laudick as his or her true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him or her and in his or her name, place and stead, in any
and all capacities, to sign the Form 10-K, any and all amendments and documents
related thereto, and to file the same, and all exhibits thereto, and other
documents relating thereto, with the Securities and Exchange Commission, and
grants unto each of said attorneys-in-fact and substitute or substitutes full
power and authority to do each and every act and thing requested and necessary
to be done in and about the premises as fully to all intents and purposes as he
or she might do in person, and hereby ratifies and confirms all things that each
of said attorneys-in-fact and substitute or substitutes may lawfully do and seek
to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand this
30th day of March, 1995.
/s/ Lawrence A. Laudick
----------------------------------
Lawrence A. Laudick
Vice President, General Controller &
Assistant Secretary
44
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS: That the undersigned officer and/or
director of Wendy's International, Inc. (the "Company"), which is about to file
a Form 10-K with the Securities and Exchange Commission, under the provisions of
the Securities Exchange Act of 1934, as amended, hereby constitutes and appoints
John K. Casey and Lawrence A. Laudick as his or her true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him or her and in his or her name, place and stead, in any
and all capacities, to sign the Form 10-K, any and all amendments and documents
related thereto, and to file the same, and all exhibits thereto, and other
documents relating thereto, with the Securities and Exchange Commission, and
grants unto each of said attorneys-in-fact and substitute or substitutes full
power and authority to do each and every act and thing requested and necessary
to be done in and about the premises as fully to all intents and purposes as he
or she might do in person, and hereby ratifies and confirms all things that each
of said attorneys-in-fact and substitute or substitutes may lawfully do and seek
to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand this
30th day of March, 1995.
/s/ W. Clay Hamner
-----------------------------
W. Clay Hamner, Director
45
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS: That the undersigned officer and/or
director of Wendy's International, Inc. (the "Company"), which is about to file
a Form 10-K with the Securities and Exchange Commission, under the provisions of
the Securities Exchange Act of 1934, as amended, hereby constitutes and appoints
John K. Casey and Lawrence A. Laudick as his or her true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him or her and in his or her name, place and stead, in any
and all capacities, to sign the Form 10-K, any and all amendments and documents
related thereto, and to file the same, and all exhibits thereto, and other
documents relating thereto, with the Securities and Exchange Commission, and
grants unto each of said attorneys-in-fact and substitute or substitutes full
power and authority to do each and every act and thing requested and necessary
to be done in and about the premises as fully to all intents and purposes as he
or she might do in person, and hereby ratifies and confirms all things that each
of said attorneys-in-fact and substitute or substitutes may lawfully do and seek
to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand this
20th day of March, 1995.
/s/ Ernest S. Hayeck
---------------------------
Ernest S. Hayeck, Director
46
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS: That the undersigned officer and/or
director of Wendy's International, Inc. (the "Company"), which is about to file
a Form 10-K with the Securities and Exchange Commission, under the provisions of
the Securities Exchange Act of 1934, as amended, hereby constitutes and appoints
John K. Casey and Lawrence A. Laudick as his or her true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him or her and in his or her name, place and stead, in any
and all capacities, to sign the Form 10-K, any and all amendments and documents
related thereto, and to file the same, and all exhibits thereto, and other
documents relating thereto, with the Securities and Exchange Commission, and
grants unto each of said attorneys-in-fact and substitute or substitutes full
power and authority to do each and every act and thing requested and necessary
to be done in and about the premises as fully to all intents and purposes as he
or she might do in person, and hereby ratifies and confirms all things that each
of said attorneys-in-fact and substitute or substitutes may lawfully do and seek
to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand this
30th day of March, 1995.
/s/ Janet Hill
--------------------------
Janet Hill, Director
47
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS: That the undersigned officer and/or
director of Wendy's International, Inc. (the "Company"), which is about to file
a Form 10-K with the Securities and Exchange Commission, under the provisions of
the Securities Exchange Act of 1934, as amended, hereby constitutes and appoints
John K. Casey and Lawrence A. Laudick as his or her true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him or her and in his or her name, place and stead, in any
and all capacities, to sign the Form 10-K, any and all amendments and documents
related thereto, and to file the same, and all exhibits thereto, and other
documents relating thereto, with the Securities and Exchange Commission, and
grants unto each of said attorneys-in-fact and substitute or substitutes full
power and authority to do each and every act and thing requested and necessary
to be done in and about the premises as fully to all intents and purposes as he
or she might do in person, and hereby ratifies and confirms all things that each
of said attorneys-in-fact and substitute or substitutes may lawfully do and seek
to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand this
30th day of March, 1995.
/s/ Thomas F. Keller
---------------------------
Thomas F. Keller, Director
48
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS: That the undersigned officer and/or
director of Wendy's International, Inc. (the "Company"), which is about to file
a Form 10-K with the Securities and Exchange Commission, under the provisions of
the Securities Exchange Act of 1934, as amended, hereby constitutes and appoints
John K. Casey and Lawrence A. Laudick as his or her true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him or her and in his or her name, place and stead, in any
and all capacities, to sign the Form 10-K, any and all amendments and documents
related thereto, and to file the same, and all exhibits thereto, and other
documents relating thereto, with the Securities and Exchange Commission, and
grants unto each of said attorneys-in-fact and substitute or substitutes full
power and authority to do each and every act and thing requested and necessary
to be done in and about the premises as fully to all intents and purposes as he
or she might do in person, and hereby ratifies and confirms all things that each
of said attorneys-in-fact and substitute or substitutes may lawfully do and seek
to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand this
18th day of March, 1995.
/s/ Fielden B. Nutter, Sr.
--------------------------------
Fielden B. Nutter, Sr., Director
49
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS: That the undersigned officer and/or
director of Wendy's International, Inc. (the "Company"), which is about to file
a Form 10-K with the Securities and Exchange Commission, under the provisions of
the Securities Exchange Act of 1934, as amended, hereby constitutes and appoints
John K. Casey and Lawrence A. Laudick as his or her true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him or her and in his or her name, place and stead, in any
and all capacities, to sign the Form 10-K, any and all amendments and documents
related thereto, and to file the same, and all exhibits thereto, and other
documents relating thereto, with the Securities and Exchange Commission, and
grants unto each of said attorneys-in-fact and substitute or substitutes full
power and authority to do each and every act and thing requested and necessary
to be done in and about the premises as fully to all intents and purposes as he
or she might do in person, and hereby ratifies and confirms all things that each
of said attorneys-in-fact and substitute or substitutes may lawfully do and seek
to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand this
21st day of March, 1995.
/s/ James V. Pickett
--------------------------------
James V. Pickett, Director
50
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS: That the undersigned officer and/or
director of Wendy's International, Inc. (the "Company"), which is about to file
a Form 10-K with the Securities and Exchange Commission, under the provisions of
the Securities Exchange Act of 1934, as amended, hereby constitutes and appoints
John K. Casey and Lawrence A. Laudick as his or her true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him or her and in his or her name, place and stead, in any
and all capacities, to sign the Form 10-K, any and all amendments and documents
related thereto, and to file the same, and all exhibits thereto, and other
documents relating thereto, with the Securities and Exchange Commission, and
grants unto each of said attorneys-in-fact and substitute or substitutes full
power and authority to do each and every act and thing requested and necessary
to be done in and about the premises as fully to all intents and purposes as he
or she might do in person, and hereby ratifies and confirms all things that each
of said attorneys-in-fact and substitute or substitutes may lawfully do and seek
to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand this
21st day of March, 1995.
/s/ Frederick R. Reed
----------------------------
Frederick R. Reed, Director
51
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS: That the undersigned officer and/or
director of Wendy's International, Inc. (the "Company"), which is about to file
a Form 10-K with the Securities and Exchange Commission, under the provisions of
the Securities Exchange Act of 1934, as amended, hereby constitutes and appoints
John K. Casey and Lawrence A. Laudick as his or her true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him or her and in his or her name, place and stead, in any
and all capacities, to sign the Form 10-K, any and all amendments and documents
related thereto, and to file the same, and all exhibits thereto, and other
documents relating thereto, with the Securities and Exchange Commission, and
grants unto each of said attorneys-in-fact and substitute or substitutes full
power and authority to do each and every act and thing requested and necessary
to be done in and about the premises as fully to all intents and purposes as he
or she might do in person, and hereby ratifies and confirms all things that each
of said attorneys-in-fact and substitute or substitutes may lawfully do and seek
to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand this
30th day of March, 1995.
/s/ Thekla R. Shackelford
-----------------------------------
Thekla R. Shackelford, Director
52
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated balance sheet and consolidated statement of income and is qualified
in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-01-1995
<PERIOD-START> JAN-03-1994
<PERIOD-END> JAN-01-1995
<CASH> 119,639
<SECURITIES> 15,292
<RECEIVABLES> 35,461<F1>
<ALLOWANCES> 7,700
<INVENTORY> 19,702
<CURRENT-ASSETS> 203,161
<PP&E> 1,223,687
<DEPRECIATION> (457,368)
<TOTAL-ASSETS> 1,086,092
<CURRENT-LIABILITIES> 207,177
<BONDS> 104,842
<COMMON> 10,179
0
0
<OTHER-SE> 671,319
<TOTAL-LIABILITY-AND-EQUITY> 1,086,092
<SALES> 1,256,192
<TOTAL-REVENUES> 1,397,857
<CGS> 731,691
<TOTAL-COSTS> 1,062,171<F2>
<OTHER-EXPENSES> 176,324
<LOSS-PROVISION> 700
<INTEREST-EXPENSE> 9,891<F3>
<INCOME-PRETAX> 149,471
<INCOME-TAX> 52,315
<INCOME-CONTINUING> 97,156
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 97,156
<EPS-PRIMARY> .93
<EPS-DILUTED> .91
<FN>
<F1>Represents accounts and notes receivables, net
<F2>Cost of goods sold and company restaurant opening costs
<F3>Represents interest, net
</FN>
</TABLE>
