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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) November 12, 1998
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WENDY'S INTERNATIONAL, INC.
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(Exact name of registrant as specified in its charter)
Ohio 1-8116 31-0785108
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(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
4288 West Dublin-Granville Road, Dublin, Ohio 43017
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (614) 764-3100
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Not Applicable
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(Former name or former address, if changed since last report.)
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Item 1. Changes in Control of Registrant.
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Not applicable.
Item 2. Acquisition or Disposition of Assets.
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Not applicable.
Item 3. Bankruptcy or Receivership.
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Not applicable.
Item 4. Changes in Registrant's Certifying Accountant.
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Not applicable.
Item 5. Other Events.
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On November 12, 1998, the Company issued a press
release announcing October sales, summary segment
results for the third quarter and year-to-date
periods of 1998 and 1997, and goals for earnings and
new restaurant development. The press release is
attached hereto as Exhibit 99 and incorporated herein
by reference.
Item 6. Resignations of Registrant's Directors.
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Not applicable.
Item 7. Financial Statements and Exhibits.
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Not applicable.
Item 8. Change in Fiscal Year.
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Not applicable.
Item 9. Sales of Equity Securities Pursuant to Regulation S.
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Not applicable.
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SIGNATURE
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Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
WENDY'S INTERNATIONAL, INC.
By: /s/ Frederick R. Reed
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Frederick R. Reed
Chief Financial Officer & Secretary
Date: November 13, 1998
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Exhibit 99
WENDY'S HOSTS ANALYST & INVESTOR MEETING,
UPDATES EARNINGS AND UNIT DEVELOPMENT GOALS
OCTOBER SAME-STORE SALES ROBUST,
FUNDAMENTALS REMAIN STRONG
DUBLIN, Ohio (November 12, 1998) -- Wendy's International, Inc. (NYSE:
WEN) is hosting today its biennial Analyst & Investor Meeting. The key
discussion points include an update on goals for earnings, restaurant
development plans, a reaffirmation of the Company's long-term strategies and an
update on the key elements of the Strategic Initiatives announced earlier this
year. Following is a summary:
The Company's total diluted earnings per share goal for the fourth
quarter of 1998 is 26 cents to 30 cents. The components of the EPS goal for the
quarter include:
o A range of 25 cents to 26 cents from the base business,
compared to the prior year's 23 cents from the base business.
The EPS goal for the base business excludes franchising gains,
the sale of real estate and fees related to the sale of notes.
o A range of 1 cent to 4 cents from the sale of real estate and fees
related to the sale of notes.
o Less than one-half cent in gains from franchising restaurants.
A year ago in the fourth quarter the Company's total EPS was 34 cents,
which included 23 cents from the base business and 11 cents in gains from
franchising restaurants. There were no gains from real estate sales in the
fourth quarter a year ago. Last year's fourth quarter EPS excludes non-recurring
charges.
The long-term goal for earnings per share from the base business is 12%
to 15% based on continued sales growth at both Wendy's and Tim Hortons,
restaurant unit openings, expansion of Wendy's domestic margins and share
repurchase. Total EPS growth could be higher depending on the sale of real
estate, fees related to the sale of notes and franchising.
"Today's announcement clarifies our short-term objectives and reaffirms
our commitment to staying focused on long-term strategies," said Gordon F.
Teter, chairman, chief executive officer and president. "We are working through
a transition year and implementing strategies to improve results from our base
businesses and our emerging businesses.
"The fundamentals of our Wendy's business in North America and Tim
Hortons in Canada are outstanding. The brands are stronger than ever, as
evidenced by the same-store sales growth over the past two years, excellent
consumer survey ratings and the 1.4% improvement in third quarter domestic
operating margins," Teter said. "So far in the fourth quarter average unit
volumes (AUVs) at domestic company operated Wendy's are up 9% to 10%, same-store
sales are up about 5% and same-store sales at Tim Hortons in Canada are up
approximately 8%."
For the year 1998, new restaurant openings are expected to total about
460 to 500 systemwide, compared to an original goal of 575. The lower total is
due to challenging economic conditions in some international markets (primarily
Asia/Pacific) and development delays at Wendy's and Tim Hortons in North
America.
Due to the challenging conditions internationally, the Company is
conducting a strategic review of its equity ownership in the United Kingdom,
where it has 14 company operated and four franchised
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units. Separately, the Company is reviewing alternatives to continue expanding
in Argentina, where 18 Wendy's have opened since 1996 and have achieved strong
sales volumes and brand acceptance. The Company currently has a real estate
joint venture in Argentina with a franchise partner. These two reviews could
result in a charge to earnings.
The Company's goal is to increase new restaurant openings by about 15%
in 1999 to a revised range of 560 to 590 systemwide. Most of the increase is
expected from Wendy's in North America as the Company continues to focus on both
existing and underpenetrated markets. The development goal includes a strategic
action plan to improve the site selection process, add company operated
restaurants and assist franchisees with real estate development.
Additional resources and personnel required for the development
program, as well as other strategic programs in progress, have raised the
Company's general and administrative costs. The Company is also making strategic
investments in a comprehensive corporate and field-level information technology
project that will extend into 1999 and is making investments to establish the
Tim Hortons business in the U.S.
"We are focused on improving results," said Frederick R. Reed, chief
financial officer. "That includes an ongoing review of all of our business
units. It also includes an ongoing examination of the balance sheet to identify
underperforming assets earning less than Wendy's cost of capital. Our goal is to
improve return on capital by 2% within three years.
"We are pleased that an important part of our strategy to improve
returns is well ahead of plan. The Company announced in February a plan to
repurchase $200 million of common shares over an 18- to 24-month period. Through
the end of the third quarter on October 4, we repurchased $198 million, or 8.7
million common shares, in just eight months," Reed said. "Furthermore, in August
the board authorized an additional $150 million for the share repurchase program
to a total of $350 million. We intend to continue buying back common shares
during the fourth quarter."
The Company also announced today that it plans to begin reporting
revenues and pretax income by business division in its year-end annual report
and Form 10-K. A summary of business division segment data for the third quarter
is attached to this news release. The Company will continue to report geographic
data in its annual report and Form 10-K.
Wendy's International, Inc. is one of the world's largest restaurant
operating and franchising companies with $6 billion in systemwide sales in 1997.
Wendy's Old Fashioned Hamburgers, founded by Dave Thomas in 1969, is the third
largest quick-service hamburger restaurant chain in the world with 5,266 units.
The Company also owns Tim Hortons, founded in 1964, which is the largest coffee
and fresh baked goods chain in Canada with 1,598 units systemwide.
CONTACT: John D. Barker (614-764-3044) or Denny Lynch (614-764-3413)
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<TABLE>
SUMMARY SEGMENT RESULTS
THIRD QUARTER 1998
($ THOUSANDS)
<CAPTION>
1997 YTD 1998 YTD
REVENUES PRETAX INCOME REVENUES PRETAX INCOME
-------- ------------- -------- -------------
<S> <C> <C> <C> <C>
WENDY'S U.S. 1,185,108 222,983(1) 1,079,487 197,484(1)
& NEW BAKERY
TIM HORTONS 236,694 41,961(2) 291,795 41,884(2)
(CANADA & U.S.)
INTERNATIONAL WENDY'S 102,798 2,793 99,430 3,455
(INCLUDING CANADA)
CORPORATE (51,194) (60,104)
</TABLE>
(1) INCLUDES GAINS ON SALE OF RESTAURANTS OF $54,924 IN 1997,
$2,584 IN 1998, AND GAINS ON SALE OF LEASED PROPERTIES OF $628
IN 1997 AND $13,118 IN 1998.
(2) INCLUDES LOSSES ON TIM HORTONS U.S. OF $2,994 IN 1997 AND
$11,700 IN 1998.
NOTE: PRETAX INCOME INCLUDES INTEREST AS INTERNALLY ALLOCATED.
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SAFE HARBOR UNDER THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995
Certain information in this news release, particularly information regarding
future economic performance and finances, and plans, expectations and objectives
of management, is forward looking. The following factors, in addition to other
possible factors not listed, could affect the Company's actual results and cause
such results to differ materially from those expressed in forward-looking
statements:
COMPETITION. The quick-service restaurant industry is intensely competitive with
respect to price, service, location, personnel, and type and quality of food.
The Company and its franchisees compete with international, regional, and local
organizations primarily through the quality, variety, and value perception of
food products offered. The number and location of units, quality and speed of
service, attractiveness of facilities, effectiveness of advertising and
marketing programs, and new product development by the Company and its
competitors are also important factors. The Company anticipates that intense
competition will continue to focus on pricing. Certain of the Company's
competitors have substantially larger marketing budgets.
ECONOMIC, MARKET AND OTHER CONDITIONS. The quick-service restaurant industry is
affected by changes in national, regional, and local economic conditions,
consumer preferences and spending patterns, demographic trends, consumer
perceptions of food safety, weather, traffic patterns, and the type, number and
location of competing restaurants. Factors such as inflation, food costs, labor
and benefit costs, legal claims, and the availability of management and hourly
employees also affect restaurant operations and administrative expenses. The
ability of the Company and its franchisees to finance new restaurant
development, improvements and additions to existing restaurants, and the
acquisition of restaurants from, and sale of restaurants to franchisees is
affected by economic conditions, including interest rates and other government
policies impacting land and construction costs and the cost and availability of
borrowed funds.
IMPORTANCE OF LOCATIONS. The success of Company and franchised restaurants is
dependent in substantial part on location. There can be no assurance that
current locations will continue to be attractive, as demographic patterns
change. It is possible the neighborhood or economic conditions where restaurants
are located could decline in the future, thus resulting in potentially reduced
sales in those locations.
GOVERNMENT REGULATION. The Company and its franchisees are subject to various
federal, state, and local laws affecting their business. The development and
operation of restaurants depend to a significant extent on the selection and
acquisition of suitable sites, which are subject to zoning, land use,
environmental, traffic, and other regulations. Restaurant operations are also
subject to licensing and regulation by state and local departments relating to
health, sanitation and safety standards, federal and state labor laws (including
applicable minimum wage requirements, overtime, working and safety conditions,
and citizenship requirements), federal and state laws which prohibit
discrimination, and other laws regulating the design and operation of
facilities, such as the Americans with Disabilities Act of 1990.
Changes in these laws and regulations, particularly increases in applicable
minimum wages, may adversely affect financial results. The operation of the
Company's franchisee system is also subject to regulation enacted by a number of
states and rules promulgated by the Federal Trade Commission. The Company cannot
predict the effect on its operations, particularly on its relationship with
franchisees, of the future enactment of additional legislation regulating the
franchise relationship.
GROWTH PLANS. The Company plans to significantly increase the number of
systemwide Wendy's and Tim Hortons restaurants open or under construction. There
can be no assurance that the Company or its franchisees will be able to achieve
growth objectives or that new restaurants opened or acquired will be profitable.
The opening and success of restaurants depends on various factors, including the
identification and availability of suitable and economically viable locations,
sales levels at existing restaurants, the negotiation of acceptable lease or
purchase terms for new locations, permitting and regulatory compliance, the
ability to meet construction schedules, the financial and other development
capabilities of franchisees, the ability of the Company to hire and train
qualified management personnel, and general economic and business conditions.
INTERNATIONAL OPERATIONS. The Company's business outside of the United States is
subject to a number of additional factors, including international economic and
political conditions, differing cultures and consumer
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preferences, currency regulations and fluctuations, diverse government
regulations and tax systems, uncertain or differing interpretations of rights
and obligations in connection with international franchise agreements and the
collection of royalties from international franchisees, the availability and
cost of land and construction costs, and the availability of experienced
management, appropriate franchisees, and joint venture partners. Although the
Company believes it has developed the support structure required for
international growth, there is no assurance that such growth will occur or that
international operations will be profitable.
DISPOSITION OF RESTAURANTS. The disposition of Company-operated restaurants to
new or existing franchisees is part of the Company's strategy to develop the
overall health of the system by acquiring restaurants from, and disposing of
restaurants to, franchisees where prudent. The expectation of gains from future
dispositions of restaurants depends in part on the ability of the Company to
complete these transactions on acceptable terms and at or near prices estimated
as attainable by the Company. The non-recurring charge recorded in the fourth
quarter of 1997 included $35 million related to the closure or sale of
restaurants to franchisees and the disposition of surplus properties. The actual
loss incurred from these activities could vary significantly from the Company's
estimate due to many of the factors set forth above.
TRANSACTIONS TO IMPROVE RETURN ON INVESTMENT. The Company owns several notes
receivable issued by franchisees. The Company has entered into an agreement with
a third party lender that permits the lender to contact franchisees, offer to
refinance notes and enter into commitments to refinance such notes on or before
March 31, 1999. The Company expects that a substantial portion of the notes will
be refinanced. However, franchisees could decide to not refinance for various
reasons, including changes in economic, credit market or other conditions, and
the Company cannot require franchisees to refinance. In addition, the timing of
refinancing transactions would be controlled by the lender and franchisees. As a
result, there is no assurance as to when the Company could receive cash proceeds
or realize income from refinancing transactions.
The sale of real estate previously leased to franchisees is generally part of
the program to improve the Company's return on invested capital. There are
various reasons why the program might be unsuccessful, including changes in
economic, credit market, real estate market or other conditions, and the ability
of the Company to complete sale transactions on acceptable terms and at or near
the prices estimated as attainable by the Company.
YEAR 2000. The Company anticipates timely completion of its program to address
year 2000 issues. However, if the new information systems are not implemented on
a timely basis, modifications to existing systems cannot be accomplished on a
timely basis, information technology resources do not remain available, or other
unanticipated events occur, there would be adverse financial and operational
effects on the Company. The amount of these effects cannot be ascertained at
this time. Although the Company has not been informed of material year 2000
issues by third parties with which it has a material relationship or
franchisees, there is no assurance that these entities will be year 2000
compliant on a timely basis. Unanticipated failures or significant delays in
furnishing products or services by third parties or general public
infrastructure service providers, or the inability of franchisees to perform
sales reporting and financial management functions or to make timely payments to
the Company or suppliers, could have a material adverse effect on results of
operations, financial condition and/or liquidity.
Readers are cautioned not to place undue reliance on forward-looking statements,
which speak only as of the date thereof. The Company undertakes no obligation to
publicly release any revisions to the forward-looking statements contained in
this release, or to update them to reflect events or circumstances occurring
after the date of this release, or to reflect the occurrence of unanticipated
events.
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