Industry News | February 9, 2001

Wendy's Reports Results for 2000

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2/9/01--Wendy's International, Inc. (NYSE: WEN) announced today its financial results for year 2000 and the fourth quarter. The company's fiscal year and quarter ended on December 31, 2000.

2000 Highlights
• Systemwide sales grew 8.9% to a record $7.7 billion, consisting of $6.4 billion in systemwide sales for Wendy's® and $1.3 billion for Tim Hortons®.

• The company opened a record 552 new restaurants systemwide during the year, raising total systemwide units to an all-time high of 7,772. The total consists of 5,792 Wendy's and 1,980 Tim Hortons.

• Total revenues increased 8.2% to a record $2.2 billion.

• Same-store sales grew 3.1% at Wendy's U.S. company restaurants, on top of a 7.9% increase in 1999. Average unit sales at Wendy's U.S. company restaurants reached an all-time high of $1.31 million.

• Same-store sales at Tim Hortons restaurants in Canada grew 9.1% on top of a 10.5% increase a year ago. Average unit sales at Tim Hortons standard units in Canada reached an all-time high of $1.35 million (Canadian). Same-store sales at Tim Hortons restaurants in the U.S. grew 12.7% on top of a 13.9% increase the year before.

• Wendy's domestic operating margin declined 20 basis points in 2000 to 16.5%, due primarily to higher average crew wages.

• Reported net income was a record $170 million and diluted earnings per share (EPS) were $1.44. The results include a non-recurring charge for closing the company's unprofitable Argentina market in the fourth quarter. The charge, which was disclosed in November, totaled $18 million on a pretax basis and $0.09 per share for the year.

• Excluding the charge, net income was a record $181 million, up 8.7% from a year ago, and diluted EPS were $1.53, up 16% from a year ago.

• Diluted EPS excluding asset gains and the charge were $1.50, up 19% compared to $1.26 a year ago. Asset gains were $0.03 per share in 2000 versus $0.06 per share in 1999.

• The company purchased 5.4 million shares of Wendy's common stock in 2000 for $93 million. Since initiating a share repurchase program in 1998, the company has bought a total of 21.9 million shares for $491million.

Chief Executive Officer and President Jack Schuessler said: "2000 was a very good year overall. We delivered strong sales growth at Wendy's and Tim Hortons, good cost controls throughout the corporation and excellent earnings performance above our expectations, excluding the non-recurring charge for the strategic action in Argentina.

"Several strategies contributed to our performance in 2000. We continued to leverage our two leading brands and our superior quality position within the quick-service restaurant industry,'' Schuessler said. "We focused on continuous improvement and our long-term principles that prioritize excellent restaurant operations, responsible new restaurant growth and balanced marketing focused on quality products.''

Tom Mueller, president and chief operating officer of Wendy's North America, said: "Wendy's U.S. delivered solid same-store sales growth on top of a truly outstanding year in 1999. We opened 367 new Wendy's restaurants worldwide, with 286 of those in the U.S. where we have most of our units and the strongest performance. We look forward to another good year in 2001.''

Paul House, president and chief operating officer of Tim Hortons, said: "Our corporate team and our franchisees delivered another remarkable year with outstanding same-store sales growth in Canada and the U.S. The system opened 185 new Tim Hortons restaurants for the year, which was about 10% growth (on a gross basis) in new units. We continue to penetrate the Canada marketplace and fill in our U.S. markets of Buffalo, central Ohio and Michigan.''

  • Fourth Quarter Highlights
  • Systemwide sales grew 8.2% to a record $1.9 billion.
  • The company opened 243 new restaurants systemwide during the quarter,

including 153 Wendy's and 90 Tim Hortons.

  • Total revenues increased 7.6% to a record $572 million.
  • Same-store sales grew 3.2% at Wendy's U.S. company restaurants, on top of a 6.4% increase in 1999.
  • Same-store sales at Tim Hortons restaurants in Canada grew 8.8% on top of a 6.6% increase a year ago. Same-store sales at Tim Hortons restaurants in the U.S. grew 13.0% on top of a 14.6% increase the year before.
  • Wendy's domestic operating margin declined 60 basis points to 15.9%, due primarily to higher labor costs and store-level labor inefficiencies caused by severe winter weather.
  • Reported net income for the quarter was $34.4 million and diluted EPS were $0.29. The results include the non-recurring charge, which was $18 million on a pretax basis and $0.10 per share for the quarter.
  • Excluding the charge, net income was $46 million, up 13.1% compared to a year ago, and diluted EPS were $0.39, up 18% compared to $0.33 a year ago. The company reported no asset gains in the fourth quarter this year or in the quarter a year ago.

Kerrii Anderson, executive vice president and chief financial officer, said: "Our fourth quarter performance, excluding the charge, was better than expected due in large part to Tim Hortons very strong results in Canada and good cost controls in all areas of our business.

"It was our eighth consecutive quarter of 17% or higher EPS growth, excluding asset gains and the charge,'' said Anderson. "Looking ahead, our goal is to grow EPS in the 12-15% range during 2001. We expect the second half of 2001 to be stronger than the first half. We are very focused on quality earnings growth and continued progress on improving returns.''

Quarterly dividend approved

The Board of Directors today approved a quarterly dividend of 6 cents per share, payable on March 6 to shareholders of record as of February 20. It will be the company's 92nd consecutive dividend payment to shareholders.

Analyst meeting, conference call and Internet web cast

The company will host a breakfast meeting for analysts, investors and the media at 8:00 a.m. E.S.T. on Monday, February 12, 2001. The meeting, which will be held at the Crowne Plaza Hotel Manhattan, 1605 Broadway (at 49th Street), will be accessible via a simultaneous conference call and Internet web cast.

  • To attend the meeting at the Crowne Plaza Hotel, please R.S.V.P. to Meredith Russell at 614-764-3251.
  • To access the company's web cast, go to www.wendys.com , select "investor information and news releases'' and then select "web cast.''

Wendy's International, Inc. is one of the world's largest restaurant operating and franchising companies, with $7.7 billion in 2000 systemwide sales and two quality brands -- Wendy's and Tim Hortons. Wendy's Old Fashioned Hamburgers® was founded in 1969 by Dave Thomas and is the third largest quick-service hamburger chain in the world with nearly 5,800 restaurants in the United States, Canada and international markets. Tim Hortons was founded in 1964 by Tim Horton and Ron Joyce and is the largest coffee and fresh baked goods chain in Canada. There are nearly 2,000 Tim Hortons restaurants of which more than 1,800 are in Canada.

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 international, 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.

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 realization 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 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.