Wendy's International, Inc. (NYSE: WEN - news) announced today that fourth quarter earnings per share grew 18% to $0.33. The strong performance was driven primarily by outstanding sales growth at Wendy's U.S. and Tim Hortons Canada, store-level productivity initiatives and cost controls.
Results for the quarter, which ended on January 2, 2000, also included domestic operating margin expansion and further progress on strategic initiatives to improve shareholder value.
Fourth Quarter Highlights
- Same-store sales were very strong at Wendy's U.S. company restaurants, increasing 6.4% for the quarter, driven primarily by increased customer transactions.
- Same-store sales at Tim Hortons restaurants in Canada were up 6.6%.
- Systemwide sales increased 13% to $1.8 billion.
- Total revenues increased 12% to $534 million.
- Wendy's domestic operating margin increased 50 basis points to 16.5%.
- Net income was $41 million, up from $36 million in the same period a year ago.
- Total diluted earnings per share for the quarter were $0.33, up 18% compared to a year ago. Base EPS was also $0.33 in the fourth quarter, up 27% compared to a year ago. Fourth Quarter Diluted Earnings Per Share 4Q 1999 4Q 1998
- Increase Base EPS $0.33 $0.26 27% Asset Gains $0.00 $0.02 -- Total EPS $0.33 $0.28 18%
- Net income and EPS results for 1998 stated above exclude a non-recurring charge taken in the fourth quarter of 1998.
Chief Financial Officer Frederick R. Reed said, "Our fourth quarter performance was better than expected due primarily to sales growth, margin expansion and good control of corporate and store-level costs. We were very pleased with the 27% increase in base earnings per share. It was a quality quarter as our core businesses delivered excellent results and we made progress on our strategic initiatives."
John T. Schuessler, president and chief operating officer of Wendy's U.S. operations, added, "Our sales results were outstanding considering the heavy promotional activity by our competitors and our strong fourth quarter a year ago when Wendy's average unit volumes increased 10%. Our Service Excellence(TM) program and national marketing messages for Bacon Mushroom Melt and Spicy Chicken(TM) sandwich were very effective inbuilding customer transactions."
Paul D. House, president and chief operating officer of Tim Hortons, said, "1999 was the third year in a row in which our same-store sales growth exceeded 8%. Our growth strategy focuses on delivering our Always Fresh¨ coffee and baked goods with fast and accurate service. Over the past few years, we've been successful in building sales by introducing several new products such as iced cappuccino and Tim's Own¨ sandwiches to expand our customer base."
- Same-store sales were very strong at Wendy's U.S. company restaurants, increasing 7.9% for the full year, and same-store sales at Tim Hortons restaurants in Canada grew 10.5%.
- Average unit sales at Wendy's U.S. company restaurants reached an all- time high of $1.28 million.
- Systemwide sales for the year increased 10% to a record $7.1 billion, as Wendy's exceeded $6 billion and Tim Hortons exceeded $1 billion.
- The Company opened 482 new restaurants during the year, raising total systemwide units to an all-time high of 7,344. The total consisted of 5,527 Wendy's and 1,817 Tim Hortons.
- Total revenues increased from $1.9 billion to $2.1 billion.
- Wendy's domestic operating margin increased 110 basis points to 16.7%, the highest margin in 14 years.
- Net income was a record $167 million, up from $149 million a year ago.
- Total diluted earnings per share for the year were $1.32, up 17% compared to $1.13 a year ago. Base EPS of $1.26 was up 22% comparedto $1.03 a year ago. Asset gains were $0.06 versus $0.10 a year ago. Full-Year Diluted Earnings Per Share 1999 1998
- Increase Base EPS $1.26 $1.03 22% Asset Gains $0.06 $0.10 -- Total EPS $1.32 $1.13 17%
- Net income and EPS results for 1998 stated above exclude a non-recurring charge taken in the fourth quarter of 1998. The accompanying income statement includes the effect of the $25 million after tax charge.
Progress on Strategic Initiatives
The Company continues to make progress on its strategic initiatives intended to create shareholder value by:
- Consistently increasing sales in its Wendy's North America and Tim Hortons Canada businesses.
- Concentrating capital spending for new unit development on the highest returning businesses - Wendy's North America and Tim Hortons Canada.
- Expanding Wendy's domestic operating margins.
- Delivering Total and Base EPS growth in line with or higher than the Company's goals.
- Improving return on invested capital from 9.4% in 1997 to 11.2% at year- end 1999.
- Repurchasing 7.2 million common shares during 1999 for $187 million. Since the beginning of the repurchase program in 1998 through late January 2000, the Company has repurchased 17.2 million shares for $413 million, including $15 million in the first month of 2000. The total repurchase authorization is up to $600 million.
- Improving the balance sheet and return on capital by completing the refinancing, with third-party lenders, of notes receivable held by the Company. Cash proceeds generated from the program are being used to repurchase common shares.
- Closing underperforming company restaurants in the U.K. in October.
"Our overall progress in 1999 was outstanding," said Reed. "Our core Wendy's North America and Tim Hortons Canada businesses are extremely healthy and we have excellent momentum. Base EPS growth for the year was better than expected, reflecting the robust sales trends, effective store-level productivity initiatives and cost controls. We also continue to make considerable progress on improving return on invested capital."
"Our Service Excellence program to improve Wendy's customer service and service times at the pick-up window was very successful in 1999," said Schuessler, "and we will continue to roll it out across the Wendy's system in 2000. We have multiple sales driving strategies in place for 2000. In addition to our late night, Biggie¨ sizing and Classic¨ hamburger programs, we continue to deliver quality products and plan to introduce and test new promotional products in 2000."
Quarterly Dividend Approved
The Board of Directors today approved a quarterly dividend of 6 cents per share, payable on March 7 to shareholders of record as of February 22. It will be the Company's 88th consecutive dividend payment to shareholders.
2000 Corporate Goals
The Company's goal for Base EPS and Total EPS growth continues to be 12% to 15%. For the year 2000, the primary drivers for sales, profit and shareholder value include: Continued same-store sales growth at Wendy's U.S. and Canada, and Tim Hortons in Canada. The Company's goals for same-store sales growth in 2000 are similar to the long-term averages of about 3.5% to 4% for Wendy's U.S. and 5% to 6% for Tim Hortons Canada.
- New store development of approximately 520 units systemwide.
- Expansion of domestic operating margins at Wendy's.
- Store-level efficiency and productivity gains.
- Effective control of general and administrative costs.
- Progress on strategic initiatives.
- Improved performance from International Wendy's and Tim Hortons
U.S. January 2000 Sales Results
The Company's growth continued in January, with same-store sales up 1.5% to 2% at Wendy's U.S. company units and 10% to 11% at Tim Hortons in Canada. Severe winter weather in the Southeast U.S. and Mid-Atlantic states adversely affected customer traffic at Wendy's during the first month of the year. McCorkle Named Corporate Secretary The board of directors named Senior Vice President and General Counsel Leon M. McCorkle Jr. as corporate secretary. McCorkle, who joined the Company in 1998, replaces as secretary Frederick R. Reed, the Company's Chief Financial Officer. Reed remains on the board.
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 these forward-looking statements, or to update them to reflect events or circumstances occurring after the date of this release, or to reflect the occurrence of unanticipated events.