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SCHEDULE 14A
(RULE 14a)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
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<S> <C>
[ ] Preliminary Proxy Statement [ ] CONFIDENTIAL, FOR USE OF THE COMMISSION
ONLY (AS PERMITTED BY RULE 14a-6(e)(2))
[ ] Definitive Proxy Statement
[X] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
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WENDY'S INTERNATIONAL, INC.
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
XXXXXXXXXXXXXXXX
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is
calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
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March 18, 1997
DEAR SHAREHOLDER:
The Board of Directors and management of Wendy's International, Inc. recommend
that shareholders vote in favor of the Company's proxy proposal (see attached)
to reserve an additional 6.0 million shares of common stock for issuance under
the Company's 1990 Stock Option Plan.
The additional shares would cover 5.9 million options expected to be granted
over the next three years to key employees of Wendy's International, Inc. and
its subsidiaries, and 100,000 options expected to be granted over the next four
years for increased stock option grants to outside directors. Exercise prices
must be equal to or greater than market price at the time of the grants.
Shareholders should support the proxy proposal for several reasons:
SUPERIOR GROWTH
Adhering to a long-term strategy, Wendy's has delivered superior sales and
income growth. We are committed to continuing with our long-term strategy and to
delivering outstanding shareholder return. During the past five years, while the
1990 Stock Option Plan has been in place, Wendy's fully-diluted net income has
compounded at 24.6%.
WENDY'S FIVE-YEAR COMPOUNDED GROWTH RATE (1991-96)
PRO-FORMA* FULLY DILUTED
- ------------------------------------------------------------------
Net Income 20.3% 24.6%
Earnings Per Share 17.6% 21.5%
* To give effect to the add back of profit sharing expense
to an officer of Tim Hortons from 1991-95
COMPETITIVE COMPENSATION
Superior shareholder return and earnings growth is driven by superior people. To
attract, retain and motivate people, we focus on providing a total compensation
package to our employees, including stock options, that is incentive based and
competitive with our peers.
Note that Wendy's targets its salary and bonus compensation at the 50th
percentile among a peer group of restaurant companies, and its stock option
program at the 75th percentile to closely align our employees with the
performance of the Company's stock. The total compensation package includes base
compensation, a short-term bonus plan based on achieving targeted earnings per
share and return on assets, a long-term bonus plan based on achieving five-year
growth objectives, and stock options.
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We believe that continuing our effective broad-based stock option program is
essential to the long-term success of the Wendy's organization.
While we plan to increase the stock option portion of each outside director's
total compensation from 1,100 to 2,500 options per year, their cash compensation
would remain unchanged. The objective is to shift more of our outside director's
compensation to stock options, since stock options are directly linked to the
Company's performance.
DILUTION IMPACT
Including the effect of our WeShare program, potential dilution from new options
would be 11.9%. Without WeShare, dilution would be 9.6%. The dilution
calculation includes an adjustment for our Term Convertible Securities (TECON)
and a 1997 option exercise by the estate of former Chairman Jim Near. Our
five-year average actual dilution is 1.50%, or 1.10% without our WeShare
program. By comparison, in a 1995 survey of 10 peer restaurant companies, the
compensation consulting firm of Towers Perrin found that 5-year average dilution
from stock options was:
PERCENTILE ANNUAL DILUTION
------------------------------------------
25th 1.06%
50th 1.19%
75th 1.70%
Wendy's WeShare Program is a unique part of the Company's stock option program
that grants shares to all full-time employees throughout our operations,
including restaurant-level employees. Most companies do not grant options as
deep into their employee base. Instead, they grant options primarily to their
boards, executive management team and perhaps their officer group and senior
management.
ISS APPROVAL
Institutional Shareholder Services (ISS) has reviewed Wendy's proxy proposal for
6.0 million additional shares using its detailed valuation model. ISS said that
it "was very comfortable with Wendy's request to reserve 6 million shares." ISS
will recommend to its clients to vote in favor of the proposal.
NO RE-PRICING
Wendy's may not re-price stock options without shareholder consent and does not
intend to re-price, other than in connection with recapitalizations or other
limited circumstances as permitted in the plan.
SINCERELY,
/s/ GORDON F. TETER /s/ FREDERICK R. REED
GORDON F. TETER, FREDERICK R. REED,
CHAIRMAN, CHIEF EXECUTIVE OFFICER EXECUTIVE VICE PRESIDENT,
AND PRESIDENT GENERAL COUNSEL AND SECRETARY
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WENDY'S INTERNATIONAL, INC.
PROPOSAL TO INCREASE SHARES AVAILABLE FOR OPTIONS
1997 ANNUAL MEETING OF SHAREHOLDERS
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PROPOSAL
1. INCREASE THE NUMBER OF SHARES ISSUABLE UNDER OPTIONS TO KEY EMPLOYEES
BY 5.9 MILLION.
2. INCREASE THE NUMBER OF OPTIONS GRANTED ANNUALLY TO NON-EMPLOYEE
DIRECTORS FROM 1,100 TO 2,500.
3. INCREASE THE NUMBER OF SHARES ISSUABLE UNDER OPTIONS TO NON-EMPLOYEE
DIRECTORS BY 100,000.
* THERE ARE CURRENTLY 649,026 SHARES AVAILABLE TO BE
GRANTED.
* THE PROPOSAL IS EXPECTED TO PROVIDE FOR 3 YEARS OF
OPTIONS.
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PLAN OBJECTIVES
1. TO PROVIDE ADDITIONAL INCENTIVES TO KEY MANAGERS AND NON-EMPLOYEE
DIRECTORS.
2. TO HELP ATTRACT AND RETAIN THE BEST POSSIBLE KEY MANAGERS AND NON-
EMPLOYEE DIRECTORS.
-----5-YEAR COMPOUNDED GROWTH-----
PRO-FORMA* FULLY-DILUTED
---------- -------------
NET INCOME 20.3% 24.6%
EPS 17.6% 21.5%
* TO GIVE EFFECT TO THE ADD BACK OF PROFIT SHARING
EXPENSE TO AN OFFICER OF TIM HORTONS IN THE YEARS
1991 THROUGH 1995
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COMPENSATION
- ATTRACTING, RETAINING AND MOTIVATING THE BEST PEOPLE IS A KEY
INGREDIENT TO ACHIEVING ABOVE-AVERAGE GROWTH
- WENDY'S STOCK OPTION PROGRAM IS AN INTEGRAL PART OF A TOTAL
COMPENSATION PACKAGE THAT INCLUDES:
1. BASE COMPENSATION
2. SHORT-TERM BONUS PLAN BASED ON ACHIEVING
TARGETED EPS AND ROA
3. LONG-TERM BONUS PLAN BASED ON ACHIEVING
FIVE-YEAR GROWTH OBJECTIVES
4. STOCK OPTIONS
- WENDY'S TARGETS ITS BASE SALARIES AND INCENTIVE BONUSES AT THE 50TH
PERCENTILE AMONG A PEER GROUP OF RESTAURANT COMPANIES, AND ITS STOCK
OPTION PLANS AT THE 75TH PERCENTILE.
- WENDY'S USES TOWERS PERRIN TO HELP DESIGN ITS COMPENSATION PLANS
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THE PLANS
1. KEY EMPLOYEES
- GRANTS SET AT 75TH PERCENTILE OF A PEER GROUP CONSISTING OF
10 RESTAURANT COMPANIES WITH REVENUES GREATER THAN $500 MILLION
- PARTICIPANTS ARE THE TOP 101 MEMBERS OF MANAGEMENT
2. DIRECTORS
- OBJECTIVE IS TO SHIFT MORE OF OUR OUTSIDE DIRECTORS' TOTAL
COMPENSATION TO STOCK OPTIONS AND LESS FROM CASH
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3. WE SHARE
- BROAD-BASED PLANS ARE GROWING
--> In a 1996 survey by the National Association of Stock Plan
Professionals, 22% of 380 companies have broad-based plans
--> In an October 1996 survey of 18 peer-group restaurant
companies, 44% have broad-based plans
- PLAN DESIGN
--> All full-time, salaried employees
--> Annual grant: 10% of prior year's W-2
- EMPLOYEE TURNOVER IN THE FIELD IS DOWN SIGNIFICANTLY
--> Store general manager turnover is 20% compared to 39% in 1989
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<CAPTION>
POTENTIAL DILUTION FROM NEW OPTIONS
WITH WESHARE WITHOUT WESHARE
------------ ---------------
<S> <C> <C>
OPTIONS OUTSTANDING 10,747 7,932
OPTIONS AVAILABLE 1,279 873
NEW OPTIONS 6,000 6,000
----- -----
TOTAL OPTIONS 18,026 14,805
SHARES OUTSTANDING 113,019 113,019
RON JOYCE SHARES 16,450 16,450
------ ------
TOTAL ISSUABLE AND ISSUED 129,469 129,469
POTENTIAL DILUTION:
- ----------------------------------------------------------------------------------------
ISSUABLE & ISSUED ONLY 13.9% 11.4%
ADJUSTED FOR 7,573 TECON SHARES 13.2% 10.8%
ADJUSTED FOR 1,498 NEAR ESTATE EXERCISE 11.9% 9.6%
- ----------------------------------------------------------------------------------------
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ACTUAL DILUTION
TOTAL WITHOUT WESHARE
----- ---------------
FIVE-YEAR AVERAGE
ACTUAL DILUTION 1.5% 1.1%
IN A 1995 SURVEY OF 10 PEER GROUP RESTAURANT COMPANIES, TOWERS PERRIN FOUND THAT
FIVE-YEAR AVERAGE DILUTION FROM STOCK OPTIONS WAS:
PERCENTILE ANNUAL DILUTION
---------- ---------------
25TH 1.06%
50TH 1.19%
75TH 1.70%
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PLAN CHARACTERISTICS
- EXERCISE PRICES EQUAL OR ABOVE MARKET PRICE AT TIME OF GRANT.
- OPTION RE-PRICING NOT PERMITTED (EXCEPT FOR STOCK DIVIDENDS,
RECAPITALIZATIONS, ETC.) WITHOUT SHAREHOLDER APPROVAL.
- GRANT AMOUNTS ARE FIXED NUMBERS OF SHARES AT EACH MANAGEMENT
LEVEL.
- GRANT AMOUNTS ARE DETERMINED TO PLACE WENDY'S IN THE 75TH
PERCENTILE AMONG ITS PEERS.
- DIRECTOR PLAN IS DESIGNED TO SHIFT COMPENSATION TO BE
INCREASINGLY BASED ON STOCK PERFORMANCE.
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RECOMMENDATIONS
- INSTITUTIONAL SHAREHOLDER SERVICES REVIEWED WENDY'S
PROPOSAL IN ITS VALUATION MODEL AND WILL RECOMMEND THAT
CLIENTS VOTE IN FAVOR OF THE PROPOSAL
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PEER GROUP
RESTAURANT COMPANIES WITH REVENUES GREATER THAN $500 MILLION:
MCDONALD'S CORPORATION
FLAGSTAR COMPANIES, INC.
HOST MARRIOTT SERVICES CORP.
SHONEY'S, INC.
BRINKER INTERNATIONAL, INC.
FOODMAKER, INC.
CRACKER BARREL OLD COUNTRY STORE
BOB EVANS FARMS, INC.
RYAN'S FAMILY STEAK HOUSES, INC.
RUBY TUESDAY, INC.
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