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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) July 6, 1999
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WENDY'S INTERNATIONAL, INC.
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(Exact name of registrant as specified in its charter)
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Ohio 1-8116 31-0785108
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(State or other jurisdiction of (Commission File Number) (IRS Employer Identification No.)
incorporation)
4288 West Dublin-Granville Road, Dublin, Ohio 43017
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(Address of principal executive offices) (Zip Code)
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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 July 6, 1999, the Company issued a press release
announcing sales for the second quarter of 1999,
preliminary expected diluted earnings per share for
the second quarter, and a revised range of projected
earnings per share for full year 1999. 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: July 7, 1999
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Exhibit 99
WENDY'S REPORTS SECOND QUARTER
SALES AND EPS ABOVE EXPECTATIONS
MANAGEMENT RAISING 1999 BASE EPS GROWTH GOAL TO 18% TO 21%
DUBLIN, Ohio (July 6, 1999) -- Wendy's International, Inc. (NYSE: WEN)
today announced that sales for the second quarter, which ended on July 4, 1999,
were stronger than expected.
- - Average unit volumes (AUVs) at Wendy's(R) company restaurants in the
United States increased about 10% and have increased for 38 consecutive
months.
- - Same-store sales at Wendy's company units in the U.S. were up about 8%.
- - Tim Hortons' same-store sales in Canada were up about 10%.
Management expects the robust sales and cost controls to produce better
than planned second quarter earnings. On a preliminary basis, total diluted
earnings per share for the second quarter are expected to be $0.39, a 15%
increase from $0.34 reported a year ago. Total diluted EPS for the quarter is
expected to include about $0.04 in asset gains from the sale of real estate,
franchising and fees, compared to $0.02 in asset gains in the same quarter a
year ago.
Base EPS (total diluted EPS less asset gains) is expected to be $0.35
for the quarter, up about 21% from $0.29 in the same 13-week quarter a year ago.
The reported Total EPS results for the second quarter a year ago included 14
weeks and $0.03 in EPS from the extra accounting week (see chart below).
The Company will issue complete results for the quarter on July 28,
1999.
PRELIMINARY 1999 2ND QUARTER DILUTED EPS V. ACTUAL 1998
2Q 1999 2Q 1998 INCREASE
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Base EPS $0.35 $0.29 21%
Extra Week -- $0.03
Asset Gains $0.04 $0.02
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Total EPS $0.39 $0.34 15%
Due to the strong results year to date, management is raising its Base
EPS growth goal for 1999 to a range of 18% to 21%, up from a previous range of
16% to 18%. Base EPS was $1.03 in 1998 excluding non-recurring charges. Total
EPS for 1999 is expected to include a total of $0.06 to $0.07 in asset gains.
"We are encouraged with the overall progress at Wendy's and Tim
Hortons(R) and our ability to build on the positive momentum from the past two
quarters," said Chairman, CEO and President Gordon F. Teter. "Our performance is
attributable to improving restaurant operations, offering customers an array of
quality products and
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executing effective marketing strategies. At the same time, we have made
significant progress on long-term strategies to improve shareholder return."
The Company continued to emphasize quality products and balanced
marketing during the second quarter. Customers responded favorably during the
quarter to Wendy's "Cheddar Lovers' Bacon Cheeseburger" and Super Value Menu
promotions and the systemwide introduction of an iced cappuccino drink at Tim
Hortons.
In addition, Wendy's Service Excellence program is being expanded from
the Western U.S. region to the rest of the U.S. and Canada.
"Service Excellence has delivered significant incremental sales gains
and improved speed of service at our pick-up windows in the Western region,"
said Teter. "We look forward to the positive sales and service impact in our
other regions as we extend the program to company and franchise stores
throughout North America."
Domestic margins continued to improve in the second quarter, up an
estimated 100 to 120 basis points from 16.6% a year ago, due to the strong sales
and effective store-level productivity initiatives.
"This will be the highest quarterly domestic margin at Wendy's in the
past 10 years," said Chief Financial Officer Frederick R. Reed. "It is
encouraging to deliver the margin expansion considering that store-level crew
wages continue to be under pressure (up about 5.5% in the quarter compared to a
year ago) due to the strong U.S. economy and delivered food costs were slightly
higher than expected.
"The margin performance is an important part of our strategic
initiatives to improve return on invested capital," said Reed. "Our progress
also includes repurchasing common shares and substantially completing our
program to refinance with third-party lenders notes receivable held by the
Company."
Wendy's International, Inc. is one of the world's largest restaurant
operating and franchising companies with $6.5 billion in systemwide sales during
1998. Wendy's Old Fashioned Hamburgers was founded in 1969 by Dave Thomas and is
the third-largest quick-service hamburger restaurant chain with more than 5,300
units in the United States, Canada and other international markets. Tim Hortons
was founded in 1964 by Tim Horton and Ron Joyce and is the largest coffee and
baked goods restaurant chain in Canada. There are more than 1,700 Tim Hortons
restaurants in North America.
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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 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.
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The opening and success of restaurants depends on various factors,
including the identification and availability of suitable and economically
viable locations, sales levels at existing restaurants, the negotiation of
acceptable lease or purchase terms for new locations, permitting and regulatory
compliance, the ability to meet construction schedules, the financial and other
development capabilities of franchisees, the ability of the Company to hire and
train qualified management personnel, and general economic and business
conditions.
International Operations: The Company's business outside of the United
States is subject to a number of additional factors, including international
economic and political conditions, differing cultures and consumer preferences,
currency regulations and fluctuations, diverse government regulations and tax
systems, uncertain or differing interpretations of rights and obligations in
connection with international franchise agreements and the collection of
royalties from international franchisees, the availability and cost of land and
construction costs, and the availability of experienced management, appropriate
franchisees, and joint venture partners. Although the Company believes it has
developed the support structure required for international growth, there is no
assurance that such growth will occur or that international operations will be
profitable.
Disposition of Restaurants: The disposition of company-operated
restaurants to new or existing franchisees is part of the Company's strategy to
develop the overall health of the system by acquiring restaurants from, and
disposing of restaurants to, franchisees where prudent. The expectation of gains
from future dispositions of restaurants depends in part on the ability of the
Company to complete disposition transactions on acceptable terms.
Transactions to Improve Return on Investment: The 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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